PRIVATE BUSINESS

University of Manchester Bill [Lords]

Order for Third Reading read.
	Queen's Consent, on behalf of the Crown, signified.
	Read the Third time and passed.

Medway Council Bill

Read the Third time and passed

Oral Answers to Questions

HEALTH

The Secretary of State was asked—

Consultants (Early Retirement)

Alistair Burt: What recent representations he has received concerning early retirement from the NHS by senior consultants.

John Hutton: My right hon. Friend the Secretary of State has not received any recent representations on that issue.

Alistair Burt: Why does the Minister think that the Health Service Journal reported in the past two weeks that trusts were being offered money to massage the figures on the number of consultants still in place at the end of March 2004? Does he think that it was connected with an internal policy document from the Department of Health, that warned of the short-term nature of some measures designed to maximise the consultant count in March, such as delayed retirement? Does he appreciate the damage done to the health service through the constant manipulation of all sorts of figures, which means that no one can trust anything that the Government say any more on the health service?

John Hutton: No, I do not accept any of the hon. Gentleman's points. It is a good thing, not a bad thing, to bring forward consultant appointments. It is a good thing, not a bad thing, to delay consultant retirements from the NHS, for one simple reason: it allows more patients to be treated more quickly in his constituency and in the constituencies of all his right hon. and hon. Friends.
	There is one other thing that I should say to the hon. Gentleman: we will guarantee waiting times for NHS patients and his party would not.

Richard Taylor: Difficulties with continuity of care appear to me to be one of the most difficult factors with which consultants must cope. What plans has the Minister to address those concerns?

John Hutton: I agree with the hon. Gentleman, who speaks with some experience on these matters, that continuity of care for patients is an important issue. Equally, it is an important issue for NHS consultants and doctors. The best way to tackle those problems and others is to continue to expand the number of consultants and doctors working in the NHS, and that is precisely what we will do.

Norfolk and Norwich Hospital

Norman Lamb: If he will make a statement on the impact of the cost of the private finance initiative contract for the Norfolk and Norwich hospital on the health service in Norfolk.

Stephen Ladyman: The Norfolk and Norwich university hospital private finance initiative scheme was the fourth major PFI scheme to reach financial close and sign contracts. The Norfolk and Norwich university hospital is a high-quality hospital and was recently named among the top 40 hospitals in the United Kingdom by an international company involved in measuring health care performance.

Norman Lamb: May I draw the Minister's attention to the fact that there appears to be a black hole of well over £20 million in the Norfolk health economy and that many people in the health service in Norfolk blame the extra cost of the PFI contract, compared with traditional means of financing public sector projects? Is not he concerned that Norfolk is paying the price for being a pioneer of this form of financing and that other services, such as cancer and learning disability services, are being put at risk? Will he do anything to help Norfolk, given that it was a pioneer of this PFI form of financing?

Stephen Ladyman: I am surprised that the hon. Gentleman is not celebrating the fact that he now has one of the best hospitals in Europe serving his constituency. When a new hospital is built, that is bound to put pressure on the local health economy. That pressure does not come about as a result of it being a PFI scheme; in fact, the PFI scheme is cheaper, if we also take into account the cost of risk, than a traditional building scheme would be.

Henry Bellingham: Certainly, people in Norfolk do not begrudge this excellent hospital, but is the Minister aware that one of the big disappointments in relation to the project has been the lack of public transport access from the A47? Has he been briefed on that point, and will he do anything about it?

Stephen Ladyman: The hon. Gentleman knows perfectly well that those issues must be addressed by the local health economy. This is a 1,000-bed hospital that has been built as a result of this Government's PFI initiative, and it provides services for the whole Norfolk health economy. I would have thought that he would have joined in the celebrations of that and made sure that people were addressing those issues, which are best addressed locally.

Paul Burstow: Given that PFI projects such as those in Norfolk and elsewhere often result in fewer beds in the new hospitals, and given the Government's commitment to introducing payments by results—which is about rewarding increased activity—how will the recommendation of the Health Protection Agency that bed occupancy rates should be reduced in order to reduce infection rates be implemented? Surely the two are incompatible. There is potential for more infections in our hospitals as a consequence of the Government's policies.

Stephen Ladyman: The hon. Gentleman should recognise that 45 hospitals have been completed and are being occupied as a result of the PFI. This is a major hospital rebuilding programme. Each hospital has been rebuilt following a thorough review of local health needs by local people to ensure that the right number of beds is there for those people. I should have thought that the hon. Gentleman would join in the celebrations of a magnificent hospital delivering magnificent services to the people of Norfolk.

Kidney Dialysis

Peter Pike: What facilities are available for renal patients on dialysis for treatment while they are away from home on business or on holiday.

Rosie Winterton: A £60 million capital investment programme to expand renal services began four years ago. There are now at least 700 extra dialysis stations and 28 more dialysis units, which will make it easier for renal patients to take holidays and travel on business.

Peter Pike: I know that tremendous advances have been made in Preston and Burnley in the north-west, but does my hon. Friend accept that the scheme needs to be improved so that people can arrange to go away in the knowledge that they can get a dialysis slot wherever they go? They should not have to be confined to taking holidays in this country. In this day and age, should we not be doing something to enable people to have dialysis abroad?

Rosie Winterton: There are a number of arrangements that enable people to travel abroad—mainly within the European Union, but we have reciprocal arrangements with other countries such as Australia. We made it clear in the national service framework for renal services, published in January, that it is important for patients to be able to dialyse away from home, whether they are on holiday or on business. A group of renal commissioners, chaired by Robert Dunn of the National Kidney Federation, is considering how we can support the implementation of the framework and guidance.

Chronic Diseases

Phyllis Starkey: What plans he has to improve services for patients with chronic diseases.

John Reid: The NHS improvement plan sets out the Government's plans for providing personalised support for the millions of people with long-term or chronic conditions. All that will of course be free: there will be no charges for anyone.

Phyllis Starkey: I welcome the increased emphasis on managing patients with chronic diseases, but a significant number suffer from more than one chronic disease. One of my constituents who has Crohn's disease was recently in hospital for an unrelated operation and there was clearly a lack of communication between the different specialties involved in her care. What is being done to encourage clinicians to co-operate more across clinical specialties in the management of patients with chronic diseases?

John Reid: That is an important and pertinent question. The plans that we outlined last week will ensure that, over the next four years, we provide more support for patients, especially those who suffer from a number of conditions and therefore have the most complex health and social care needs.
	The focus will be on improving care in three main ways: by supporting all patients so that they can care for themselves and manage their conditions better whenever possible, by ensuring that all patients have access to the care that they need, and—this is particularly relevant to my hon. Friend's question—by providing personalised, co-ordinated care for the most vulnerable patients with the most complex conditions.

Angela Watkinson: The Secretary of State will be aware of the importance of respite care for those who care for family members with long-term conditions, but is he aware that no such care is available to many parents of children on the autistic spectrum because of the very specific needs of those children? What plans has he made to ensure that it becomes available?

John Reid: The hon. Lady makes yet another important point. It is true that, in addition to the extra resources that we are putting in and the extra people to provide chronic care in the localities, I announced that an additional 3,000 community matrons—specialised nurses—would be provided to help out. We try wherever possible to provide for respite care. She has drawn attention to a particular illness with particular problems in respect of respite care for the carers. I promise to look at that and perhaps to write to her on it.

Andrew Lansley: The Secretary of State just said that he is planning to provide additional community matrons. He might like to explain why, after seven years of a Government who have failed to deliver community nursing care, there are 800 fewer district nurses than there were seven years ago; why there are 15 per cent. fewer episodes of care from district nurses than there were seven years ago; and why there are 20 per cent. fewer episodes of care from health visitors than there were seven years ago.
	The Government have only just discovered the needs of those with long-term diseases. Even now, the Government's approach is not to design services around the needs and choices of patients but to put in place some community nursing without necessarily understanding how that meshes together with the role of general practitioners. Perhaps the Secretary of State would like to explain where community nursing has gone over the past seven years.

John Reid: I confess that I would like to have turned to this as a first priority seven years ago. Had we inherited something other than an impoverished and undernourished NHS in which there had been under-investment—[Hon. Members: "Oh!"] The hon. Gentleman asked me what we did for seven years before we got the 3,000 community matrons. It is a fair question.

Simon Burns: Answer it then.

John Reid: I will answer it, if the hon. Gentleman will be courteous enough to contain his excitement. We have been providing 67,500 more nurses, 18,000 of them, incidentally, in primary care, exactly the sector to which the hon. Member for South Cambridgeshire (Mr. Lansley) referred. We have more than 19,400 new doctors. Sixty-eight major new hospitals have been built, are under way or have been improved, and 2,200 GP premises have been improved. In the past three years alone, we have provided 1,600 more general and acute beds than we inherited. We have 265 one-stop services. We have slashed the waiting lists and improved the health care of millions. On top of that, we are providing yet more facilities, including 3,000 community matrons. I wish that we could have done more but we followed a Government who could not have done less for the health service.

NHS Dentists

Annette Brooke: If he will make a statement on progress in implementing the new contract for NHS dentists.

Rosie Winterton: Since the Health and Social Care (Community Health and Standards) Act 2003 received Royal Assent in November, my officials have had several meetings with the British Dental Association about the new contract. Further meetings are scheduled in the next two months. We will shortly be making a further statement on the implementation of the new contract.

Annette Brooke: What guarantee does the Minister think she may be able to give that the new proposals will improve access to NHS dentists? That is an enormous concern for my constituents. Given the latest research from the British Dental Association, which found that nearly 60 per cent. of high street dentists are likely either to reduce their commitment or quit the NHS, I seek reassurances from her today.

Rosie Winterton: Our evidence that the new contract will work is based on five years of work in pilot sites around the country. We already have about 1,500 dentists coming over to the new system of personal dental services. The hon. Lady will be aware that we worked up the proposals for the new contract with the British Dental Association because it told us that it did not like the current way of working—the treadmill effect. We are changing the system so that all the money that is currently held centrally will go to local level and primary care trusts can plan properly, in conjunction with local dentists, the NHS dentistry that is required in their area.

John Denham: I thank my hon. Friend for agreeing to visit Southampton on Thursday to discuss dentistry, and may I encourage her to do two things when she does? First, will she do everything that she can to reassure NHS dentists about the nature of the new contract, because the misconceptions about it are one reason why some are considering reducing their commitment? Secondly, I urge her to press the primary care trust to monitor dentists' intentions much more closely, so that it can intervene quickly if there are any signs of dentists planning to leave the NHS for erroneous reasons and fears in particular.

Rosie Winterton: My right hon. Friend is right: there are some misconceptions about the new contract. On PCTs ensuring that they are aware of what is happening locally, we have dental leads in every PCT and in the strategic health authorities. Earlier this year, we announced £59 million to improve access, and dental personnel working at PCT and strategic health authority level have access to that money. They can work with local dentists, so that if dentists indicate that they want to leave the NHS, money can be accessed and ways of improving services considered so that they remain NHS dentists.

Andrew Murrison: These are not just misconceptions. The dental profession seems to be united in its opposition to the new dental contract. Why does the Minister think that that is so? Could it be that, with nine months to go until the start of the contract, we have yet to be given the details of it? Could it also be because nine out of 10 dentists believe that PCTs are not up to the job of managing that contract, as the National Audit Office also seems to think?

Rosie Winterton: One problem is that dentists were completely united against the contract introduced by the previous Administration and we have had to pick up the pieces resulting from that. On dentists' attitude to the new approach, 1,500 dentists are moving over to the new system and they say that they like the new way of working. The chairman of the British Dental Association said that there are many happy practitioners working under the new system—a fact that we should be celebrating. We have put together the dental work force review and worked with the BDA on the new contract—the new way of working—which, as we have demonstrated, is working after five years of piloting. I had hoped that the hon. Gentleman would support the action that we are taking, particularly given that we are putting right the problems created by his Administration.

Breast Cancer Screening

Bill Tynan: How many women have benefited from the extension of the breast cancer screening programme to those aged between 65 and 70 years.

Melanie Johnson: Over 250,000 more women have been invited for breast screening in England since the extension to women aged 65 to 70 began in April 2001.

Bill Tynan: My hon. Friend will know that statistics show that currently, a third of all women aged over 70 suffer from breast cancer. Although I congratulate the Government on extending the programme to those aged 70, will she consider a further extension to take into account giving an automatic recall to those aged over 70?

Melanie Johnson: We have looked at the evidence on screening for the over-70s and the Advisory Committee on Breast Cancer Screening is currently reviewing it. However, there is little evidence to suggest that screening would be effective for that age group; indeed, I understand that no major country offers routine screening for the over-70s. It is possible, however, for women aged over 70 to continue to be screened, and such screening is already freely available. Women who have participated in the programme will be informed of that right at the age of 70.

Gregory Barker: The expansion in screening is to be greatly welcomed and it is to the Government's credit, but for women suffering from breast cancer it is by no means the whole picture, particularly if follow-up care is not available. In my part of the world, we are extremely worried about the situation at the Maidstone and Tunbridge Wells NHS Trust, the chief executive of which wrote to all Members of Parliament in our area. He said that waiting times for breast cancer patients needing radiotherapy is now an urgent issue, and that
	"waiting times have started to increase for all patients who require radiotherapy treatment, the longest waits now being for those with . . . breast cancer".
	This is not a new problem; we experienced it two years ago, and the numbers started to come down. Will the Minister undertake to get in touch with the trust to see what can be done to help tackle this very important problem?

Melanie Johnson: As the hon. Gentleman said, we have improved outcomes enormously through the screening programme. About a third of cancers are being detected in this way and we have detected 1,500 extra cancers through the programme in the last couple of years. I welcome his congratulations on the work of staff across the country, including, no doubt, his constituency. To a degree, we are the victims of our own success: as a lot more women are identified, a lot more women need treatment. There is a maximum waiting time for front-line treatment and, in terms of follow-up treatment, we have doubled the number of radiography training places and increased the number of clinical oncologists by a quarter since 1997. We recognise that there is still more to do to address the issues raised by the hon. Gentleman, which is why we have asked the national cancer director to undertake a stocktake on the issue.

Jenny Tonge: "Celebrate" seems to be the in word this morning and I do celebrate, if modestly, the huge improvement in detection and treatment of breast cancer in this country; that should be recognised. However, the causes of heart disease are now well known and much has been done to prevent heart disease. What resources are we putting in to the causes of breast cancer so that we can prevent this terrible disease and not just treat it when it occurs?

Melanie Johnson: I welcome the hon. Lady's congratulations on and support for the achievements so far. A number of research programmes are going on, but we already know that some things will reduce people's risk of getting cancer—including breast cancer—such as eating five pieces of fruit or vegetables a day. The hon. Lady screws up her face, but such things clearly improve outcomes across the board in relation to several cancers and coronary heart disease. There are a number of things that people can do already such as undertaking more physical activity, and we will come to those as part of the White Paper in the autumn. I am happy to undertake to write to the hon. Lady on the details of the research programmes.

John Baron: We welcome any extension of the breast cancer screening programme, but the fact remains that three quarters of all breast cancer cases are still diagnosed through the GP referral system, with which there are a number of problems. For example, whereas the Government's two-week target for women urgently referred by their GP to see a specialist is being met, Breakthrough Breast Cancer, among others, has pointed out that something like 10,000 women each year are routinely referred by their GP and subsequently misdiagnosed with breast cancer. Those women have to wait, on average, six to eight weeks—and, in some cases, up to 17 weeks—to find out whether they have breast cancer. The Government's two-week target is not helping the large number of women who are, in effect, misdiagnosed because they have been routinely referred and who must wait much longer to see a specialist at a time when they may be suffering much anxiety and stress. That also puts GPs in a difficult position, as around half of them have expressed the view that they find it difficult to distinguish between urgent and routine referrals, upon which so much depends. What is the Minister going to do to correct this lottery in breast cancer care?

Mr. Speaker: Order. Before the Minister replies, I want to explain that when I call Front Benchers, it means that Back Benchers will not be called, because I have given Front Benchers that privilege. I therefore expect shorter questions—indeed, I demand them.

Melanie Johnson: Obviously, women are hugely better off than they were under Conservative Governments. Presently, 98 per cent. or more of women with urgent referrals are being seen within two weeks. The hon. Member for Billericay (Mr. Baron) dismisses that out of hand, but those are people categorised by their doctors as the most important cases. They are now receiving speedy treatment, which could never have been guaranteed—and, indeed, people did not receive it—in the past, when only a comparatively small percentage were getting hospital referrals within two weeks.
	As to the hon. Gentleman's point about non-urgent referrals, we are interested in improving the referral accuracy of GPs. Work is being done on the guidance given to GPs about whom they should and should not refer urgently. Overall, the effect of the Government's policies and investment is hugely positive for women with breast cancer. The outcomes demonstrate that, with more than a 10 per cent. overall cut in cancers reflecting similar cuts in breast cancer mortality across the piece.

Scanners

Brian Iddon: How many additional scanners have been provided in the NHS in the last year; and how many of these are in the north-west.

John Reid: Forty-five scanners—29 CT and 16 MRI scanners—were delivered to the NHS through centrally funded programmes in 2003–04. Of those, six were delivered to NHS trusts in the north-west. In addition, we announced last week that NHS MRI scanning capacity will be increased by a further 15 per cent. as a result of procuring 12 state-of-the-art mobile units from the private sector. Three of those will be based in the north-west.

Brian Iddon: I welcome that news. The New Opportunities Fund has provided the Royal Bolton hospital with a new £700,000 scanner, which will detect cancers. Unfortunately, it is being used only for six half-day sessions a week because the hospital cannot provide suitably trained staff who can interpret the images from the scanner. What account is my right hon. Friend taking of the budgets necessary to staff the new scanners? Can he please comment on the provision of adequately trained staff?

John Reid: In terms of the budgets, even our most churlish critic would accept that an increase in the Bolton Hospitals NHS Trust budget from about £108 million to £130 million between 1999 and this year is a significant increase in revenue funding. As to the scanners themselves, my hon. Friend will be aware that one MRI scanner was delivered last year and I believe that two CT scanners are scheduled to be delivered in the next couple of years. In terms of staff, yes, it is difficult. We are expanding NHS staff and 84 per cent. of them are involved in direct patient care, despite the constant refrain from Conservative Members that everyone in the NHS is a useless unproductive bureaucrat. It is difficult to get radiologists, but I can tell my hon. Friend that there are more radiology staff than ever before. Since 1997, the number of clinical radiologists has increased by 26 per cent. and the number of diagnostic radiographers by 13 per cent. We will boost those figures further by an additional £3 million investment.

Nigel Evans: The Secretary of State for Health has mentioned mobile scanners. Will he ensure that they will be made available to rural areas around the north-west of England, including Clitheroe in Ribble Valley, whose needs are as great as in any other place? Will he also ensure that trained staff will be made available to local residents so that they secure the level of service that they are paying for?

John Reid: We are certainly trying to do that. The point of having mobile scanners is not just to add to capacity, although the announcement last week by the Minister of State, Department of Health, my right hon. Friend the Member for Barrow and Furness (Mr. Hutton) spoke of adding some 500,000 to 600,000 scans to our capacity over the next few years, which is an enormous increase. The fact that they are mobile means that they can be taken to the places where the needs are greatest and also to rural areas. There will be two mobile units in London, two in north-east Yorkshire and Humber, three in the north-west and west midlands, two in the east midlands and the east and three in the south. That, to adopt the word of the morning, is cause to celebrate, not least in Leicester where two MRI scanners have already been delivered and Birmingham where three MRI scanners and nine CT scanners have been delivered.

General Practitioners

Tony Lloyd: What initiatives are in place to encourage the retention of general practitioners in inner-city areas.

John Hutton: The Government are committed to increasing the number of GPs working in under-doctored areas, which include many inner-city practices. A range of measures have been put in place to achieve that, including the allocation of extra training places and payments of up to £12,000 for GPs beginning their careers in those areas.

Tony Lloyd: Obviously, my right hon. Friend's answer is very helpful, but may I draw his attention to the specific problem of population change in the inner cities? There has been a very rapid decline in some areas, and in others—such as the centre of my city of Manchester—the increase has been extremely rapid. A decline in population places a significant strain on GPs in financial terms, while a rise poses difficulties in terms of patient numbers. I hope that my right hon. Friend looks very seriously at the problem. The rapid population growth in the centre of Manchester is a major issue. We need more GP services to serve the new population. The problem is not unique to Manchester but is apparent in other cities, such as Birmingham and Leicester, where the Government's many achievements are already celebrated. However, people are listening to the debate on this matter.

John Hutton: I very strongly agree with my hon. Friend. Central Manchester's population is booming because of the significant success of local regeneration schemes. I agree too that there is a need to ensure that primary care trust funding allocations keep abreast of population changes. I accept his criticism that that may not always have happened in the past. That is why we are looking very carefully at the problem that he highlights as part of the next wave of allocations to PCTs, and I am sure that he will agree that it is a priority.

Jonathan Sayeed: The Minister will know that GP retirements are concentrated in inner-city practices run by a single doctor—and especially in practices where the retired doctor was Asian. The Government have promised some 2,000 more GPs, but have not specified that they will all work full-time. The British Medical Association says that we need an extra 10,000 GPs. How do the Government intend to square that circle?

John Hutton: I hope that the hon. Gentleman at least will welcome the fact that 2,000 more GPs are working in the NHS—but perhaps he was coming to that. There has been a significant increase in the number of whole-time equivalents as well. We need to continue the investment and to support PCTs in using a variety of mechanisms to expand the GP work force. The hon. Gentleman's strictures today would have had more credibility if he and his party had any plans to increase the size of the primary care work force. Sadly, they do not.

Bill O'Brien: On the question of retaining GPs in inner-city areas, will my right hon. Friend take into consideration the problems that arise in urban areas? When two GPs left a practice in my constituency, the withdrawal of the satellite service caused much inconvenience for people. Is there any incentive to encourage doctors to work in urban areas? The PCT has done all it can to fill the vacancies, but more assistance is needed.

John Hutton: Again, I agree with my hon. Friend that there remain parts of primary care in England that experience difficulties in recruiting more GPs, and he referred to problems in his area. In my earlier answer, I set out some of the incentives that we have put in place, but I can tell the House that we are looking at ways to increase them further. I hope to make an announcement on that very shortly.

Anne McIntosh: If he will make a statement on the implementation of the new general practitioner contract.

John Hutton: The new primary care contract was approved overwhelmingly by a ballot of general practitioners, and is being implemented successfully. All but five practices working under general medical services arrangements have signed the contract. Payments under the new contract have all been made on time.

Anne McIntosh: People can see a doctor within 48 hours only if they declare themselves to be an emergency, and in parts of the country it is impossible to see a doctor out of hours in the evenings or at weekends. Will the Minister apologise for that? Does he accept that the new GP contract is an abject failure, and that his Government have let this country down?

John Hutton: No. In the light of recent exchanges in the House, I hope that the hon. Lady will understand why I will not take at face value any of the so-called facts that she has just brought to our attention. They are not the case. She might be better off having a word with the motley crew on the Opposition Front Bench about the new GP contract, because I understand that the hon. Member for South Cambridgeshire (Mr. Lansley) has said that he supports it.

Bob Blizzard: Lowestoft is not a city like Manchester, Birmingham or Leicester, but it contains some of the deprivation associated with those cities. In assessing the new GP contract, will my right hon. Friend take into account the difficulties of recruiting and retaining GPs in the poorer parts of Lowestoft, which do not benefit from the incentives that are offered elsewhere? Will my right hon. Friend look at that situation?

John Hutton: Yes, I certainly will look at the point that my hon. Friend raises. The incentives for new GPs who are starting their careers are all targeted at under-doctored areas, and that will include the constituency that my hon. Friend so ably represents. The key is to continue the investment in primary care, which is set to increase by 33 per cent. over the next couple of years and to ensure that we seek to improve the health of the poorest communities in Britain at a faster rate than any other community. That is what this Labour Government are committed to doing.

Simon Burns: Does the Minister really think it is successful that last weekend in Norfolk half the GPs who provided the out-of-hours service had to be flown in from Germany? Is the Minister doing anything to prevent the inevitable chaos at weekends for the out-of-hours service as GPs cease to have surgeries on Saturday mornings, and the pressures on the service in the evenings during the week as patients cannot get appointments?

John Hutton: I know that the hon. Gentleman has a vested interest in spreading doom and gloom about the national health service. In relation to the points that he raises, some 40 PCTs have now successfully negotiated opt-out arrangements in relation to the new contract with their local practices. The general view is that those opt-out arrangements are working effectively. The hon. Gentleman raised the issue of Norfolk and I understand that it is looking at finding some doctors from Germany to support the work of GPs.
	It was important to make the changes to the contract, because the doctors themselves asked us to do it and agreed to the changes in the ballot. The new contract will help us in the wider sense of recruiting more GPs to work in primary care. However, we should nail one misunderstanding. The contract does not suggest that out-of-hours services will end: it will remain the case that people will have access to a GP out of hours. That is the legal responsibility of PCTs and it cannot be avoided. My understanding is that the Conservative party supports the changes to the contractual arrangements for the employment of GPs, but they come here and imply that they think that we should not make those changes. What a bunch of hypocrites they are. [Hon. Members: "Oh!"]

Mr. Speaker: Order. The right hon. Gentleman will withdraw that remark.

John Hutton: Of course, Mr. Speaker—

Mr. Speaker: Order. He should say nothing else; just withdraw the remark.

John Hutton: I am happy to withdraw that remark.

Gisela Stuart: GP services in Birmingham have improved tremendously and the contracts are working. It is a fact that 98 per cent. of people in Birmingham can see a GP within 48 hours. However, GPs do not operate in isolation. We must continue to drive down the waiting lists for referrals to see a consultant. Will my right hon. Friend remind the people of Birmingham—especially those in Hodge Hill, who will be voting soon—which party represents their interests, is driving the NHS forward and will continue those improvements, not jeopardise them?

John Hutton: I am very happy to do that. People face a clear choice between a party that is committed to investment and giving patients guarantees about when they will be treated and by whom, and the Opposition, who would do none of those things.

Single Sex Wards

Marion Roe: What progress has been made with making wards in child and adolescent mental health services units single-sex.

Stephen Ladyman: The data are not collected centrally, but the Royal College of Psychiatrists' quality network for in-patient child and adolescent mental health services conducts annual reviews of services. Of the units reviewed in 2002–03, 89 per cent. fully or partly met its standards for single-sex privacy, and for units reviewed so far in 2003–04, that has increased to 98 per cent.

Marion Roe: I am grateful to the Minister for that reply, but can he tell the House what action is being taken to stop young and adolescent mental health patients being placed in adult mental health wards, and what measures the Government propose to take to ease the crisis in resources for such patients?

Stephen Ladyman: I congratulate the hon. Lady on her recently bestowed honour.
	The hon. Lady is right; there is a real problem when it becomes necessary to place adolescents in adult wards and we are working very hard to avoid it, not only by giving guidance to the services but also by making major investments in those services. I bring to her attention the fact that later this year we shall be publishing the national service framework for children, which will include further extensive guidance on the subject.

Tim Loughton: If we are "motley", I dread to think what unparliamentary language would be required accurately to describe the shower on the Treasury Bench—

Mr. Speaker: Order. I dealt with the remark that was made. I want temperate language at all times.

Tim Loughton: Why did a recent British Medical Journal survey of psychiatrists and paediatricians reveal that nearly two thirds of under-18-year-olds with mental health problems were admitted to inappropriate wards, many to adult wards? They were the lucky ones, given that the mean number of adolescent in-patient beds is only 7.1 beds per 100,000 of the population, leading to the conclusion that there is an absolute lack of capacity in child and adolescent in-patient psychiatrist units. Given all the Government's bluster about eradicating mixed-sex wards for adults with physical illness—unsuccessfully—why have they done nothing to end mixed-sex wards for adolescents with mental illness, potentially the most vulnerable of all?

Stephen Ladyman: I would not have thought child and adolescent mental services an obvious subject for levity, but perhaps my sense of humour is not quite as refined as the hon. Gentleman's.
	We are making a major investment in child and adolescent mental health services, including an investment in new wards and in providing single rooms and separate-sex facilities. We are making the investment that will improve a service with which we are not happy. The hon. Gentleman is pledged to taking that investment out.

Patient Capacity

Janet Dean: What plans he has to increase patient capacity within the NHS.

John Reid: The NHS is expanding capacity as never before, with 19,400 more doctors and 67,000 more nurses since 1997, and the largest hospital building programme in its history. That will allow us to offer faster, more responsive services and more patient choice, all free with no charges for anyone for operations or treatment.

Janet Dean: I thank my right hon. Friend for that answer and—to use the word of the morning—celebrate the fact that there has been a 35 per cent. increase in overall staffing at Queen's hospital in Burton, and a 68 per cent. increase in the number of doctors there. A new GP surgery at Winshill in my constituency is serving a local population that has not had one for between 20 and 30 years. May I also tell my right hon. Friend—

Simon Burns: Question!

Mr. Speaker: Order. I chair the proceedings in the House.

Janet Dean: There are concerns about the number of GPs, especially in the inner wards of Burton, and about the shortage of dentists in east Staffordshire. Will my right hon. Friend give the primary care trust guidance on how to address those issues?

John Reid: We always stand ready to give whatever assistance and guidance we can, although as we drive forward reforms in the national health service and increase capacity we are trying simultaneously to pass down to local level as much of the power for decision making as possible. My hon. Friend has given a balanced picture of where we are. We have made huge and significant progress on capacity over the past seven years, although we still have a long way to go, as she pointed out. However, the choice before people is plain: what we offer, in increased capacity, extended choice, more personal care, all delivered free at the point of need; or the alternative, which is to reduce NHS capacity, to scrap all targets so that there will be unlimited waiting lists, to introduce charges and give preferential treatment to the better-off, and to return to the jungle of the free market where health policy benefits only the financially fittest in this country.

Mark Francois: May I ask the Secretary of State about capacity as regards dental patients in the NHS? In large parts of my constituency, it is now practically impossible to register with an NHS dentist. People must go to a practice well outside the constituency to do so. In Hockley, in my constituency, there is a particular problem. The residents association has come up with some innovative proposals to address it, but those in the local health economy appear to be pooh-poohing them at present. Will the Secretary of State allow me to write to him specifically about that very difficult situation to find out whether he can do something to address the black hole in NHS dentistry in my constituency?

John Reid: Of course I look forward to receiving any representation on that from any Member on either side of the House. I have not hidden—nor has the Minister of State, Department of Health, my hon. Friend the Member for Doncaster, Central (Ms Winterton)—from the huge challenges that we face with dentistry. Again, let us try to get a balanced picture. There are more dentists in this country than ever before. There has been a 15 per cent. increase in the number of dentists in this country. There are more dentists in training than ever before, but there are problems that relate to the contract. I make no party political point, but that is not merely a problem under this Government. There is a problem with getting in extra dentists in the short term, as well as with training them for the long term. I will address all those points in the coming week, because this issue should not separate us on party political grounds, but I certainly look forward to receiving any ideas and representations. One idea that I will not accept is to reduce the capacity that we are putting into the NHS—an idea that could only make the situation worse.

Gordon Prentice: We need more home-grown doctors because, very often, doctors will stay in the area where they were trained. May I ask my right hon. Friend whether there is any plan to establish a new medical school in the north-west, based on the university of Central Lancashire?

John Reid: It is not always that I can start with the words, "I agree entirely with my hon. Friend," but I can today. That is why we have got 60 per cent. more home-grown doctors, and more medical students and a higher number of applications to medical colleges than ever before. We have opened four more medical colleges as well.
	All that is a massive advance, but it is short of where we would want to be in an ideal world. However, I hope that people will recognise that, if we want to build on the advances of the past few years, we need increased capacity and more personal control for patients, and all that must be delivered free at the point of need. We should be celebrating this morning the fact that, as shown in a BBC poll, 70 to 80 per cent. of the people of this country agree with us on that and are entirely opposed to any plan to charge people for health care.

Enbrel

Martin Smyth: When he expects Enbrel to be available for general prescription throughout the NHS.

Rosie Winterton: Enbrel is already available on NHS prescription.

Martin Smyth: It may be in England, but I understand that it is not yet available in Northern Ireland, where patients are crying out for it. Will the Minister have a chat with her colleagues in the Northern Ireland Office to find out whether Enbrel may become free on prescription not in three years' time, but to meet patients' needs at the moment?

Rosie Winterton: As I said, Enbrel is available on prescription. The hon. Gentleman may be referring to the National Institute for Clinical Excellence guidelines, which are implemented in England and Wales, but the implementation of NICE guidelines is, in fact, a devolved decision. However, I can assure him that officials in the Northern Ireland Office are considering more formal ways of working with the relevant national standard-setting bodies, including NICE, which will address the problem that he raises.

Waiting Times (Hendon)

Andrew Dismore: What steps he plans to take to reduce hospital waiting times for residents in Hendon.

John Hutton: Maximum waiting times for hospital treatment in my hon. Friend's constituency have halved since 1997. On 24 June, the Government set out our plans to reduce further waiting times for treatment, which will bring further benefits to my hon. Friend's constituents.

Andrew Dismore: May I celebrate my right hon. Friend's answer and the fact that he, rather than the Conservative party, is running the health service in London? There is still some spare capacity at Edgware hospital. Will he work with Barnet and Chase Farm trust and others to find out whether that extra capacity can be brought into use by some of the consultants there, who seem a little reluctant to travel the short distance involved?

John Hutton: I will certainly look into the matter my hon. Friend has raised.

Patient Choice

Andrew George: What assessment he has made of the potential for patient choice in remote rural areas.

Stephen Ladyman: Increasing patient choice offers all patients, including those in rural areas, the opportunity to have more control over their health care. Choice should also lead to better quality services as health care providers respond to the choices that patients make.

Andrew George: I am grateful for that reply, but does the Minister accept that the reality in rural areas is a choice between whether people have a hospital or not, and a consideration of whether there are enough acute and primary care beds and front-line staff, and sufficient diagnostic capacity in the NHS in such areas, rather than a synthetic argument about the choice to join some elective queue or other somewhere else?

Stephen Ladyman: So in the hon. Gentleman's opinion, Cornish mothers do not want to choose between midwife-led units and obstetrician-led units for their births, and the 3,000 people from the health economy in his area who have already chosen under existing plans to travel to shorten their waiting time for coronary heart disease operations do not want that choice. It is absolutely true that part of what we must do is to drive up capacity and ensure that that is available everywhere. However, one of the great drivers for that—it is also a driver for increasing quality—is giving people choice, and that is just as relevant, and perhaps even more relevant, in rural areas as it is anywhere else.

Desmond Swayne: May I join a modest celebration and congratulate Ministers on the way in which they have expanded the choice available to my rural constituents by making use of the availability and capacity of the private sector? Does the Minister, in accepting the success of that scheme, believe that it is time to expand it further to alleviate the suffering of people who have had to dip into their savings to afford life-changing, or life-saving, treatments?

Stephen Ladyman: The hon. Gentleman's party's policy is to force people to pay from their own pockets if they want choice, while our policy is to give people choice without their having to spend extra money. He would unleash inefficiency on the health service by allowing people to buy from the private sector one at a time. When we choose to use the private sector, we negotiate and buy in bulk, and get cost effectiveness as a result.

Life Expectancy

Teddy Taylor: What estimate he has made of the impact on health service spending of the increase in life expectancy.

John Hutton: The Wanless review reported that the impact of ageing on future health expenditure is likely to be small compared with other cost drivers.

Teddy Taylor: Does the Minister agree that bed blocking by elderly patients remains a major difficulty in the health service that causes many problems for the medical services? Does he agree that the problem should be faced up to seriously because it will obviously get worse if we have more elderly patients? Does he think that the matter should be examined independently and carefully to determine whether we can find a real solution to bed blocking?

John Hutton: I do agree that we need to examine such issues carefully. I am glad to be able to tell the hon. Gentleman and the House that bed blocking in the national health service has reduced hugely, largely as a result of the new legislation and extra investment that we have put in place, both of which he and his hon. Friends opposed in the House.

Children's Hospices

Jeff Ennis: If he will increase the amount of NHS funding being channelled towards children's hospices.

Stephen Ladyman: Children's hospice services are funded from a number of sources, including services commissioned by national health service primary care trusts on the basis of their assessment of children's needs and their priorities. There are no limits to the amount of funding that may be provided—that is for local decision.

Jeff Ennis: I am sure that the Minister is aware of my early-day motion 667, entitled "Review of NHS Funding for Children's Hospices", which highlights a differential that exists whereby children's hospices receive only 5 per cent. of their funding through the NHS while adult's hospices receive up to 38 per cent. of their funding in such a way. There is genuine concern throughout South Yorkshire about the disparity, so will the Minister meet me to discuss the matter in greater detail?

Stephen Ladyman: I would be happy to meet my hon. Friend, but I must stress again that services for children's hospices need to be based on the needs of individual children, not on the basis of a blanket figure that he or I might think appropriate.

Nutrition (Young People)

Bob Russell: If he will make a statement on the nutritional content of meals for young people.

Melanie Johnson: The latest national diet and nutrition survey of young people aged 14 to 18 in 2000 showed that they consumed too much saturated fat, sugar and salt and too few fruit and vegetables.

Bob Russell: I thank the Minister for her answer as far as it went, but will she have discussions with her colleagues in the Department for Education and Skills, as successive attacks on the school meal service by this Government and the previous one have seriously affected the health and well-being of children? Will she also ask her colleagues in the national health service why they are promoting unhealthy products through the NHS "Popzone", as it is not acceptable for the NHS to promote such products?

Melanie Johnson: I am happy for the hon. Gentleman to send me anything about which he is discontented so that I can have a further look at it, but we are in regular discussions with the DFES about initiatives to encourage and enable children and their families to make healthier food choices, including national healthy school standards, the food in schools programme, the school fruit and vegetable scheme, the healthy living blueprint and healthy start. A range of initiatives is therefore under way to improve children's health as well as the food that they eat during and outside the school day.

Roads Policy

Alistair Darling: With permission, Mr. Speaker, I should like to make a short statement on new measures to encourage better use of our roads and on the M6 between Birmingham and Manchester.
	Decades of under-investment and a growing economy have put our roads under severe pressure. Two steps are necessary if we are to reduce congestion, especially at peak times. First, we need to make better use of our existing roads and, secondly, we must provide additional capacity on key strategic routes. I have two proposals to tackle congestion and provide more reliable journey times, including a scheme to make better use of the existing capacity on the road network by encouraging people to share vehicles at peak times.
	Car pool lanes have been used to great effect, both in America and Australia, and if it works in other parts of the world there is no reason in principle why it should not work here. Car pool lanes could play an important role in reducing congestion on key commuter routes. I have therefore asked the Highways Agency to carry out a feasibility study of four sites on the motorway network for trialling high occupancy vehicle or car pool lanes, which could be created by widening the road to create an additional lane or in some cases by using the hard shoulder as a running lane. They would be reserved for the use of vehicles carrying two or more people, and would offer faster, more reliable journey times.
	The Highways Agency will consider a 6-mile stretch of the M62 between junctions 25 and 27 from Brighouse to Leeds; a 7-mile stretch of the M3 between junctions 3 and 2 from Bagshot to Thorpe; a 20-mile stretch of the M1 between junctions 13 and 7 from south Milton Keynes to St. Albans; and a 7-mile stretch of the M61 between junctions 6 to 3 north-west of Manchester. In general, the Government favour the provision of extra capacity for car pool lanes, but in the case of the M61 it may be possible to use one of the existing lanes, so I have asked the Highways Agency to consider that. An assessment of each site will be carried out over the coming months that will consider operational suitability as well as safety and environmental implications. The proposal extends the measures that we are already putting in place to make better use of our existing roads, including piloting hard-shoulder running on the M42 and, since April this year, introducing traffic officers on motorways to help clear up incidents and get traffic flowing as quickly as possible.
	I come to the need for additional capacity on one of the most heavily used road arteries in the country—the M6. We need more capacity on road and rail, which is why, for example, we are investing over £7 billion in the west coast main line. When the first stage of work is complete in September it will cut half an hour from Manchester to London train times. We also need more road capacity, however, on that key route. The House will be aware that the new M6 toll motorway opened in December last year. Today, the Highways Agency has published an analysis of the first three months of traffic on the M6 toll and the existing M6. Copies of that report have been placed in the Library.   
	The report shows that the M6 toll regularly carries about one fifth of all traffic flowing through the west midlands conurbation every day, with vehicles saving up to half an hour on a journey that can take more than an hour during peak times on the existing M6. Drivers who choose not to pay the toll are benefiting from reduced congestion. Since the M6 toll opened, traffic on the existing non-tolled M6 has decreased by 10 per cent. Friday afternoons have seen a significant improvement in journey times, and there have also been improvements on roads as far afield as Stoke-on-Trent. All this has been widely welcomed by businesses, in particular across the west midlands, and by the AA and RAC.
	The M6 links two of the country's most important economic centres, Birmingham and Manchester. It is one of the busiest roads in the country, and drivers regularly suffer heavy congestion. That is why on 10 December 2002 I told the House that I would support the widening of a number of key strategic roads, including widening the M6 between junction 11A near Cannock and junction 19 near Knutsford to four lanes in each direction.
	Given the success of the M6 toll in alleviating congestion, it is now right to consider extending the tolled motorway and building a new expressway to run parallel with the M6 between Birmingham and Manchester, as an alternative to widening the existing road. This 51-mile stretch of the M6 between junctions 11A and 19 is being considered as a tolled expressway because of its importance to business and its link to the M6 toll, and because a significant percentage of its traffic travels 20 miles or more.
	There are a number of advantages to an expressway. First, it would provide motorists and businesses with a choice of using the existing M6 or paying for a faster, more reliable journey on the new road. An expressway could be designed to suit long- distance journeys with fewer junctions, and could also improve conditions on the original road, freeing up space there. Secondly, an expressway would provide double the extra capacity at a lower cost than widening the existing road by one lane. Thirdly, construction of an expressway would not cause disruption to road-users while it was being built. In comparison, widening the existing M6, which obviously would need to be done in a phased way, would cause disruption for five to six years.
	We have also to consider carefully the wider social and environmental impacts, including the effect on landscape, biodiversity and heritage, as well as air quality and climate change. We will need to assess what impact an expressway would have on traffic levels generally and the scope for high quality measures to combat any adverse effects. Sometimes new roads can have a positive impact on the environment. A new route, with good environmental mitigation plus environmental improvements to the existing M6, might overall be better in environmental terms than simply widening the existing M6. That will need to be looked at carefully.
	I am therefore publishing today a consultation on a proposal for an expressway to run parallel with the M6 between Birmingham and Manchester, as an alternative to widening the existing road, so that all these issues can be looked at thoroughly. Our approach is to tackle congestion through a range of measures, both road and rail. The proposals that I am announcing today are intended to give motorists more choice and allow far more reliable journeys. I commend this statement to the House.

Tim Yeo: I am grateful to the Secretary of State for an advance copy of the statement, the context for which is an increase in the burden of taxes paid by motorists from £31 billion a year in 1997 to £44 billion a year now, a smaller proportion of which is spent on roads in Britain than in most other countries.
	Despite such a huge burden of tax, congestion on our road network has got so bad that not only do millions of drivers face frustration and delay every day, but the congestion crisis is damaging Britain's economic prospects by weakening our competitive position compared with that of other countries. Our motorway network is poorer than that of all our main international competitors. If only it were expanding as fast as the staff of the Highways Agency, which is set to increase by three quarters, motorists could look forward to a better future.
	For years to come, Britain will suffer the consequences of Labour's war on the motorist declared by the Deputy Prime Minister in 1997, and the consequences of the Government's refusal to acknowledge what we, the CBI, the British Chambers of Commerce, the Freight Transport Association, the AA, the RAC Foundation and many others have all agreed is needed—an increase in our motorway capacity. Nevertheless, not for the first time the hype that preceded the statement enormously exceeds its substance.
	The statement is another attempt to con the media and the public into believing that decisions have been taken. It does not contain a commitment to build new roads, widen the M6 or introduce car pool lanes—all it contains is a commitment to start more consultations. The Secretary of State's reputation for indecision is the only thing enhanced by today's statement. The question that is on everyone's lips remains the same: when will car pool lanes be introduced, and when will the four new lanes on the M6 actually be built?
	I shall deal with the issues in the order in which the Secretary of State mentioned them. We have already expressed our support for the principle of car pool lanes, which can contribute to reducing congestion, although they will never be the complete answer. Car pool lanes should be introduced only where capacity is increased, and existing road capacity should not be closed to motorists who have paid for it many times over—for example, some motorists cannot find other travellers with whom to share vehicles because of their patterns of shift work. I also hope that the Secretary of State will publish his assessment of the safety implications of using hard shoulders on motorways as soon as possible.
	Turning to the possible new lanes on the M6, a proposal that Conservative Members strongly support in principle, I remind the Secretary of State that the contract for the existing midlands expressway was signed under the previous Government in 1992, more than a decade before vehicles travelled on the route. Given that today's statement concerns starting a consultation process, will the Secretary of State confirm that it is extremely unlikely that any vehicle will travel on any new lanes on the M6 before 2020?
	Given that the environmental impact of the new lanes will be felt all the way along the route, does the Secretary of State's statement mean that access to the new lanes will not be available at all the same points as access to the existing M6, in which case the communities affected by the environmental impact will not have the chance to share the benefits? What implications does today's statement carry for other improvements to the motorway network, which are desperately needed on motorways such as the M1 and M62? Have those proposals been postponed indefinitely?
	The statement is an admission that the Government's 10-year plan has completely failed, and that the targets for road building and cutting congestion will not be met. Will the Secretary of State admit that failure and say whether he will publish new and more realistic estimates of how bad congestion will get on Britain's roads? Are we to deduce from the timing of today's statement, less than one week before the announcement of the comprehensive spending review, that the Secretary of State hoped to persuade the Chancellor of the Exchequer to allow him to pay for the M6 improvements from his departmental budget, and that he failed in that endeavour?
	Since motorists may now be asked to finance road improvements, will the Government cut the tax burden currently borne by motorists? Although it is right to finance some new roads through private sector investment and acceptable to ask motorists to contribute to costs through tolls, the extra costs should be directly related to new capacity, and should not be accompanied by further increases to the tax burden—the threatened 2p duty increase in the autumn is wholly unjustified at a time of high and volatile oil prices.
	I welcome the Government's partial and belated adoption of more Conservative transport policies, although it is sad that it has taken them so long to realise what is needed and to start alleviating the substantial damage that they—in particular, the Deputy Prime Minister—have done to our transport system and our economy. It is a very long time since an incoming Government inherited such a strong economy as that inherited by this Government. One of the Government's first actions was to axe the Conservative road building programme. For the first time since the invention of tarmac, not a single foot of new road was built in 2001, and it has taken more than seven years for them to begin to acknowledge the scale of the problem.
	Today's statement is a press release masquerading as a policy. Even after the announcement, Britain's motorists will continue to rue Labour's seven wasted years, during which congestion has increased, delays have lengthened, business costs have risen and pollution has worsened. When the needs of the nation demanded decisions and action, characteristically, all the Secretary of State could produce was more dither and delay, which we will pay for in years to come.

Alistair Darling: The hon. Gentleman is sounding more and more like a Liberal Democrat by giving the impression that he is both for and against the proposals. The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) must be wondering what he should say to distinguish his position from that of the Conservative party.
	In relation to the M6, we have, as the hon. Gentleman acknowledged, already announced that in principle we support its widening: it is not as though we suddenly decided that its capacity was insufficient—[Interruption.] I will come on to the Tory position in a moment. That is why I agreed to its widening two years ago. In answer to the hon. Gentleman's specific question, today's announcement does not at all affect the position in relation to the M1, the M25 or any other road schemes that have been announced. They are in the process of being developed and taken forward.
	On spending on roads, I think that there is common ground. The problem that we have on our road and rail networks is that successive Governments, both Labour and Conservative, did not spend as much money as they should have. The hon. Gentleman talks about the roads programme that we inherited, but he must remember, because he was a Minister at the time, that the Conservatives' road programme had virtually dried up by 1997 because of the mess that they had got the economy into. In contrast, we are due over the 10-year period to spend some £59 billion on roads. The Conservatives' present policy is to cut £600 million from the transport budget, and unless that changes nothing that he says will have any credibility whatever.
	I am glad that the hon. Gentleman supports car pool lanes in principle. I, too, believe that where possible they should be built on new capacity. All the experience from other parts of the world shows that motorists accept that where new capacity is provided, priority should be given to motorists carrying passengers. Earlier this year, I visited the United States, where some 3 million people use car pool lanes; there is an entire network in the north-east and over in California. As they work there, there is no reason why they cannot work here. The best approach is to provide new capacity, but, as I said, in the case of one particular road north-west of Manchester existing carriageway could be involved if we decide that that is right.
	The hon. Gentleman mentioned consultation. If we are to build an expressway of any sort, it is inconceivable that consultation will not take place. That is obvious, if for no other reason than that such projects take up time in the planning process.
	The hon. Gentleman is right to recognise that the Government are determined to ensure that we improve capacity on our transport system, both road and rail. I believe that these measures represent a significant step forward and that in time people will recognise the advances that are being made in such provision.

John Thurso: I thank the Secretary of State for his courtesy in sending me a copy of the statement. I congratulate him on his new tactic of damning Conservative Front Benchers with faint praise; if they wish to behave like Liberal Democrats, that is entirely up to them.
	On car pool lanes, I welcome the principle of encouraging shared use of cars. Some 61 per cent. of car journeys are made by single occupancy cars, and figures show that a 10 per cent. increase in occupancy would result in a 9 per cent. reduction in traffic. I, too, have seen the schemes that operate in America, although I did so courtesy of a visit with the Select Committee on Culture, Media and Sport. In light of the American experience, how does the Secretary of State expect that the policy will be enforced? As he will know, enforcement has caused considerable problems in America, in Australia and in the pilot scheme in Leeds. Has he given any thought to permitting single occupants to use such lanes on payment of an additional fee, as happens in the United States?
	The Secretary of State mentioned that the current proposal is to use car pool lanes only where it is possible to build additional capacity. What studies, if any, have been carried out to see whether car sharing might work on some of the less congested roads where extra capacity would not necessarily be required? Will he tell us what the Government will do to deliver any other measures to support car sharing? Will he also tell us how the Government intend to finance the new M6 toll road? Will it be undertaken on a private finance initiative, as was the existing toll road, or will it be funded by Government finance? What assessment has been made of the financial implications of the current scheme?
	What environmental assessment has been made of the existing scheme? Have emissions increased or decreased? It is important to know, when considering the overall policy, whether schemes such as these play a positive or negative role in that regard. Given that the Secretary of State has previously recorded his opposition to such schemes, are the Government considering any others? Last year, in The Scotsman, the Secretary of State was quoted as saying:
	"We can't build our way out of congestion . . . The idea that you can build lane after lane after lane is just bonkers."
	So, while this scheme may be welcome, is it not now the time to consider a proper national road-user charging scheme, rather than some form of piecemeal privatisation of the motorway network?

Alistair Darling: The hon. Gentleman asked about enforcement in regard to car pool lanes. The use of such lanes is enforced in the United States—and, I think, in Australia—by the police. I have travelled quite extensively in some of these car pool lanes, and it is remarkable how many people do not abuse the system. It seems to work, and I would envisage the police enforcing those rules. In relation to car sharing elsewhere, yes, of course that would be possible. It is always possible for the local authorities that control local roads to consider these options if they want to do so. That is not a matter for the Government.
	The hon. Gentleman asked a number of questions about the M6 toll road. In relation to the environmental assessment, research is being carried out at the moment, but it obviously takes time. The M6 toll road opened only in December. In regard to the new road, the Government hope that it will be privately financed, as the existing toll road is.
	On the hon. Gentleman's last point, yes, it is the case that we cannot build our way out of all the problems that we face. That is perfectly true, and I have said so time and again ever since I became Secretary of State. Three things are necessary. The first is to provide additional limited capacity where a problem exists, and the M6 is a classic example of that. It was anticipated that that road would carry about 75,000 cars a day, but it now regularly carries 150,000 a day. The capacity there needs to be increased. Secondly, we need to make better use of the infrastructure that we have, and car pool lanes would be among a number of measures introduced to achieve that. Thirdly, as the hon. Gentleman says, we need to plan ahead. Over the next 20 to 30 years, new technology will be available. That is why I commissioned a study last year to examine the technical feasibility of a national road pricing scheme. However, I have to tell the hon. Gentleman that, on any view, that is 10 to 15 years away.

Andrew Miller: I am conscious of the number of colleagues from Staffordshire around me here. I strongly support my right hon. Friend's comments about the need for the M6 expressway. The existing toll road has undoubtedly proved a great success. Will he ensure, however, that businesses in the north-west, particularly manufacturing companies in constituencies such as mine, are consulted as part of the process, so that it is not just a geographical consultation in the immediate surrounding areas?

Alistair Darling: I shall be brief, so as to allow as many other hon. Members as possible to speak. Yes, I can give my hon. Friend that assurance. This will be a national consultation; it will not be confined to the route of the M6.

Patrick Cormack: In deploring the fact that the first part of this statement was leaked yesterday and the rest this morning, may I ask the Secretary of State whether he would please bear it in mind that my constituents, and those of many of my neighbours, have been devastated and blighted by the building of successive motorways over the past 30 years, including the M6, the M54, the toll road, the threatened link road from the toll road, and now this? What will the Secretary of State do to reassure those people? Can we have a detailed timetable and, above all, an assurance that the compensation claims of people suffering from such blight will be considered very quickly?

Alistair Darling: When specific proposals are made, such claims are looked at fairly quickly, but I appreciate the point that the hon. Gentleman makes. Indeed, he came to see me a few months ago to discuss some of his concerns, and he was very frank about his position. There are always two sides to these arguments, and he recognises that additional road capacity is required. I appreciate, however, that people living alongside the route might be affected. Two years ago, I said that I thought that the road needed to be extended. That would involve five to six years of construction work, when it started. This is an alternative. In the light of what we now know about the M6 toll road, it would be daft not to ask ourselves whether this would not be a better way of providing the additional capacity up that corridor.
	On the hon. Gentleman's first point, it is unfortunate that the more people we have to involve in making a decision, the greater the risk becomes that somebody will talk. I can assure the hon. Gentleman that, when these things were broadcast on the radio this morning, I would have liked to have been there to argue my corner, rather than having to wait five hours to put my case, but that is life. Yes, of course the Government sometimes tell people what is going on and sometimes they do not; I appreciate the hon. Gentleman's point.

Tony Lloyd: I welcome my right hon. Friend's statement on the new capacity for the M6. There is no doubt that the present situation is unacceptable, in regard to both congestion and the environment. One of the problems involved in road building programmes is that the process of construction can often be as damaging, in congestion terms, as the existing problem, if the project is not handled well. That means that we must put a premium on speed in this process, and also on the project being extremely well managed. People want to know that this scheme will relieve congestion and not simply cause problems in the medium term. Will my right hon. Friend also give me a guarantee that this programme is sufficiently robust, so that, if it took some time to complete, the kind of cuts that a future Conservative Government might bring in would not put it in jeopardy?

Alistair Darling: My hon. Friend is right. A future Conservative Government who had pledged to cut spending would have to cut the roads programme along with just about everything else. He is also right to say that the construction can cause a lot of disruption. One of the attractions of building an expressway of the kind that I have proposed is that it can be built parallel to the existing road. It would not therefore cause five or six years' worth of additional congestion on the M6. I am sure that my hon. Friend would not look forward to the prospect of driving up and down the M6 for five or six years while it was being widened. Another general point is that the maintenance of roads—we are doing a lot at the moment—can be disruptive. I understand people's frustration in that regard, but—as with the railways, where there has been a lot of disruption on the west coast main line—once the work has been satisfactorily completed, journey time reliability will improve. That is something that we should all aspire to.

John Redwood: I welcome the Secretary of State's statement and his commitment to more capacity. One easy thing that he could do would be to put a statutory instrument before the House to allow cars carrying more than one person to use the bus lane on the M4, a much under-used lane that is already demarked for special purposes. Such a proposal would make his statement even more popular.

Alistair Darling: I have considered that, because it seemed an obvious thing to do. However, the advice that I received was that, if we did that, that road would no longer have the capacity that it needs, because the bus lane is not an extra lane, as the right hon. Gentleman knows. It was taken from the existing third lane. There would therefore be a risk of adding to the congestion. I have looked at that proposal, however, and I would be happy to discuss it with the right hon. Gentleman or anyone else. I have also asked my officials to continue to look at it, because it was a very obvious candidate to me. I am told, however, that if we did it, there would be a serious risk of the road becoming completely gummed up. Obviously, we need to work through those issues.

Joan Walley: I was very pleased to hear my right hon. Friend say that he accepted that we could not build our way out of congestion. I also welcome his proposals on car sharing. On the M6 proposals, I am disappointed that we are not really considering the full opportunities offered by the multi-modal studies that were carried out. On the timing of the proposals, will he give me an assurance that there will be full consultation with Advantage West Midlands on both sustainable development and economic regeneration? We already have consultants going ahead with surveys on transport, and we need to know now how this longer time scale will affect all that.

Alistair Darling: This consultation will run until the end of September, and there will be ample time for all interested parties to put their views. The multi-modal studies suggested that there is an economic case for widening the existing M6 to five lanes. Two years ago, I agreed to widen it to four lanes. The point that I made a few moments ago bears repetition: we are talking about either widening the road to four lanes or, as an alternative, having an expressway. There are arguments for and against, but I believe that the arguments for an expressway are pretty persuasive.
	We are spending £7.5 billion on the west coast main line precisely because we want to ensure that there are good public transport alternatives. The M6 was designed to carry 75,000 cars a day; it is now carrying perhaps 150,000 at peak periods. That is unsustainable: it is not good for the environment, for business or for anybody, and that is why I want to sort it out.

John Pugh: What studies have been conducted into the effect of the expressway parallel to the M6 on rail patronage, given that £7 billion has gone into the west coast main line?

Alistair Darling: The hon. Gentleman will be aware that the number of people using our railways is increasing, with more than 1 billion passengers being carried by the railways last year. Indeed, when the first phase of the west coast main line is completed in September, it will become a more attractive proposition. I cannot agree with what is implicit in his comments, which is that the way to get more people to use trains is to make it increasingly difficult to go up and down the M6—[Interruption.] The Liberal Democrats always give the distinct impression that that is what they are saying. We need to invest in road and rail capacity to give people a proper choice.

Colin Challen: If I understood correctly my right hon. Friend's answer to the right hon. Member for Wokingham (Mr. Redwood), he suggested that, were car sharing allowed on the M4 bus lane, it would lead to more congestion. Will extra capacity for such lanes elsewhere in the country be reserved for public transport, so that we can avoid the possibility that he mentioned in relation to the M4?

Alistair Darling: I do not want to over-complicate the proposal before it is too old. I propose additional capacity for cars containing two or more people: adding more and more people before the hour is out will lead to disaster. However, as my hon. Friend knows, there are many examples of bus lanes and other measures that give priority to public transport. This proposal is specifically about car pool lanes, however, and is very much modelled on what happens in parts of the United States. As I said, it works there, and I do not see why, in principle, it cannot work here.

Angela Browning: What are the safety implications of turning existing hard shoulders into running lanes?

Alistair Darling: The hon. Lady is right that there are safety implications, which is why we are considering them carefully. She may recall that, a couple of years ago, I announced that we were going to consider the use of the hard shoulder on the M42 at peak times, to try to relieve congestion. Obviously, a lot of new technology is required to make sure that traffic speeds reduce and cars can run safely. Again, that works in continental Europe—for example, in Holland—and it is one way of making better use of existing capacity. The alternative is to build more lanes on the M42, which would have an environmental effect.
	My strategy is clear: let us have additional capacity where it is required, but let us get the most out of the assets that we already have. I think that I heard the current Conservative spokesman say such a thing on a Sunday television programme a few weeks ago—[Interruption.] Perhaps I was listening to the wrong programme; it was someone who looked like the hon. Gentleman and who claimed to be the Conservative transport spokesman, but they are changing so fast now that we can never be sure. The hon. Lady's point in relation to safety is important, and we shall certainly consider it.

Tony Wright: The M6 toll road is a considerable achievement. There was quite a stir last year, however, when a director of one of the companies involved said that the terms of the contract, with the absence of Government regulation, meant that it was the best opportunity for monopoly pricing anywhere in the world. He was quoted in The Daily Telegraph as saying,"We won't see anything like this ever again." Will my right hon. Friend assure us that, in contract terms, we will not see anything like this ever again?

Alistair Darling: If I recall rightly, the gentleman in question was taken out and shot—metaphorically, at least. I was never sure whether he was shot because he said the wrong thing, or whether he was being remarkably candid about what his company thought. One of the features of the midland express contract, which was signed in 1992, is that the company has the absolute right to charge whatever it wants—within some constraints, but it has fairly free rein. Obviously, we need to examine that, because there is an issue of public policy. Hauliers are deeply unhappy about the £11 charge that they face at the moment.

Patrick McLoughlin: The Secretary of State said that the benefits of the toll road had been spread as far as Stoke-on-Trent. I ask him to consider whether that might be partly due to the completion of the A50 link road. When will that concrete road be resurfaced with a better, less noisy surface? Will the scheme that the Secretary of State has announced fall under schemes of national importance as far as the Transport and Works Act 1992 is concerned?

Alistair Darling: I need to consider the latter point—it is certainly a pretty major scheme. In relation to concreting, I had better write to the hon. Gentleman and see what point the programme has reached. I am glad, however, that he recognises that the improvements to roads are beginning to bear fruit. He might want to reflect on the fact that if that programme were to be cut drastically, it would have an adverse effect.

Paul Farrelly: The Secretary of State will be aware that my constituency is in the enviable position of stretching exactly between junctions 15 and 16 of the M6. There has already been much uncertainty about the impact of M6 widening, especially how we would fit just one lane on each side on the stretches between Seabridge, Keele, Audley and Betley in my constituency, and between Butterton and Madeley in the Stone constituency. He will be aware that there will be immense concern about how a four or six-lane expressway will run parallel with the M6. Will he therefore say a little more about how the national consultation will work, and what undertakings he can give to me and my constituents in the borough of Newcastle-under-Lyme that their voices will be heard and not drowned out?

Alistair Darling: Of course all voices will be heard. As I said earlier, the in-principle consultation will allow my hon. Friend and all his constituents ample opportunity to say what they think. In relation to the planning process, when a route is proposed, whether it is a widening or a new scheme, it is also subject to consultation, which is why I was at a loss to understand the criticism that was made earlier. People have every right to be consulted. I hope that we can avoid the situation that we had with the existing M6 toll: the contract was signed in 1992 and given the go-ahead in the mid-1980s, but I am told that it was first discussed when Harold Wilson was Prime Minister. That gives the House some idea of how long it takes to build anything in this country.

Bob Russell: Will the Secretary of State confirm that hard shoulders have been provided on motorways because highway engineers, road safety experts and the emergency services believe that they are a vital road safety measure that enable broken-down vehicles to avoid fast-moving traffic. In his calculations, how many crashes, injuries and deaths is he prepared to accept?

Alistair Darling: Not for the first time, the hon. Gentleman goes a little bit over the top. In relation to the M42, we are going to see whether hard shoulder running at peak times works, and considerable discussion, not just with highway operators but with the police, fire and ambulance services and others, has taken place. This has worked successfully in the Netherlands, for example, which has very heavy road usage, and it is worth considering. He is right that safety is important, and we take it very seriously.

David Kidney: In the 1990s, the Conservative Government published and then withdrew proposals to widen the M6 motorway by what was called the parallel widening method. Is it intended that the expressway would fill the route of those proposed parallel works?
	Does my right hon. Friend accept that Stafford contains the greatest concentration of houses and environmentally sensitive sites on the entire route? Does the plan give Stafford a wide berth? If not, has he dusted off the part of the multi-modal study that suggested a brand-new road rather than a monster motorway through Staffordshire?

Alistair Darling: My hon. Friend is right to raise environmental concerns, and concerns for those whom he represents. The consultation is about whether, in principle, we should build a tolled expressway rather than widen the road. No specific route is included in the consultation; when we reach that stage we shall have to consult people, because they will want to know exactly where the road would be built, but that is the second stage rather than the first.

George Osborne: The Secretary of State said that the M6 linked Birmingham to Manchester, but in fact, as he knows, it bypasses Manchester and pushes Manchester-bound traffic on to the wholly unsuitable A556 at junction 19. When he looked at the proposal for a new toll road, did he consider extending it to junction 20 so that the traffic could go on to the M56? That would be much more sensible. If we were given that in return for the concreting of thousands of acres of my constituency, we would not just be shifting the traffic jam to the end of the toll road.

Alistair Darling: My recollection is that the hon. Gentleman and I have already discussed the A556. He will recall that when we last discussed it on the Floor of the House I said that I was greatly troubled by the proposal to build a motorway along it. We are now considering whether there are better ways of directing the traffic. Once we have reached a conclusion, it will influence where the expressway will end.
	The hon. Gentleman is right: major environmental sensitivities are involved along the A556. As I have said in the House before, I am concerned about that, which is why I have asked the Highways Agency to consider alternatives.

Bob Blizzard: I know it is on the other side of the country, but I used the north Birmingham toll road earlier in the year and thought it excellent. I look forward to another 50 miles of it stretching north to Manchester.
	When considering wider roads policy, will my right hon. Friend take account of parts of the country such as mine, which have no decent roads at all? Will he give thought to that, in the interests of equity and inclusion—not just in the context of trunk roads, because there are none in my constituency—when he evaluates proposals for major capital schemes in local transport plans?

Bob Russell: Involving Lowestoft.

Alistair Darling: I am well aware of my hon. Friend's concerns about transport not just to Lowestoft but in East Anglia. Again, there are sensitive issues, such as the need to ensure that people can get about on the roads and the fact that it happens to be a very nice part of the country. My colleagues and I consider such issues every time proposals such as this come before us.

Michael Fabricant: The existing M6 toll road is regarded as a great success and very useful to my constituency, which is now close to a motorway; it certainly was not before. The Secretary of State will know, however, that it is not used very much by heavy trucks or commercial vehicles, which seems to be a deliberate policy. Does he not understand the frustration felt by many of us—particularly me—about the fact that heavy trucks from the continent, which pay no British taxes, can fill up with diesel in France and travel all the way up to Scotland and back without refuelling in the United Kingdom? If they, too, refuse to use the new M6 toll road, once again foreign trucks will be using British roads and paying nothing. Can the Secretary of State envisage any possibility that overseas transporters will put their share into the British road system?

Alistair Darling: Yes, I can. That is why the Government are introducing a lorry road user charging scheme, with the widespread support of the haulage industry, whereby lorries will be charged on the basis of the distance they travel rather than money being raised from the purchase of petrol or diesel. We want all lorry drivers who use our roads to pay their fair share. The scheme is well advanced, and it will make a big difference. It also has much wider implications for the future of our cars, but that is for another day.

Buses (Concessionary Fares)

Michael Foster: I beg to move,
	That leave be given to bring in a Bill to make provision about concessionary fares on buses for elderly persons.
	I believe that the Bill tackles several issues that are important not just to my constituents but to more than 7 million other people throughout England. Concessionary bus fares have been a contentious issue across the country for some time because of the patchwork of different schemes that has developed over the years.
	The Transport Act 2000 amended the legislation covering concessionary fares in England and Wales from 1 June 2001 outside London and from 1 April in inner London. Local authorities must now provide elderly and disabled people with at least half-fare concessions on local bus travel. Since April 2003, men have been eligible for travel concessions from the age of 60. Local authorities also have discretion to offer further concessions on buses and other public transport services if they wish, under the Transport Act 1985. Concessionary fare schemes for local public transport are the responsibility of local government and are funded and administered by it. That is the nub of the problem.
	As a result, the nature and extent of concessions have varied from region to region—in Worcestershire, even from parish to parish. It is that inconsistent patchwork approach that rightly causes resentment among pensioners. The Bill's purpose is to create a uniform approach, ending the postcode lottery for free bus travel.
	Pensioners in Scotland, Wales and Northern Ireland already enjoy free bus travel, as do those in London, Merseyside and the west midlands conurbation. The Government estimate that that covers some 20 per cent. of pensioners. There are other isolated areas with free bus travel for pensioners, such as Redditch in Worcestershire, but they are all too few.
	The national concessionary scheme was needed in the late 1990s and was welcomed, but it does not go far enough. Back in 1998, 10 local authorities in England had no concessionary fare schemes. One was Malvern Hills in Worcestershire. The Government have started to make progress, but more is now needed. It cannot be right for a pensioner in one part of the United Kingdom to have a free bus pass and free bus travel while others still have to pay. Let me give a personal example. Both my grandmothers are still alive, and both are 90. One lives in Birmingham and has had free bus travel for 30 years; the other lives in south Staffordshire and has not. The best way of avoiding a postcode lottery is to introduce a scheme providing universal entitlement to free bus travel for pensioners.
	There is no doubt about the benefit to pensioners of free bus travel, apart from the obvious economic gains. The aims of reducing the sense of isolation, supporting independence in old age and giving some of the most socially excluded people a chance to travel should be uppermost in our decision making. There are also wider public benefits, including reduced traffic congestion as fewer car journeys are made, and consequent reductions in pollution.
	It has been said that free bus travel is of no use in some of the more rural and sparsely populated parts of England, as there are no buses on which to travel. With universally free bus travel, demand would obviously increase. Bus operators would respond by providing services that could be used not just by pensioners but by other members of the public. The lack of public transport is still one of the major concerns of young and old alike in rural areas.
	Under current legislation, making the concession universal would force local authorities to grant the concession. I accept that in areas with two-tier local government that would create more challenges, with districts having a smaller tax resource base to fund the subsidies. One solution is to get rid of the two tiers of local government in England as soon as possible, giving unitary authorities a bigger tax base on which to fund the concession. That would also allow greater purchasing power in dealings with bus operators. Rather than six Worcestershire districts dealing with one bus operator, there would be a united voice that would almost certainly generate a better deal for the taxpayer, making free bus travel more affordable to the authority.
	Such a move would also get rid of another lottery that blights the travel concession scheme—namely, who benefits, as it is up to local councils to co-operate with each other for mutually advantageous concessions. For example, someone living in Malvern in the Malvern Hills district can get a half-fare return to Worcester, crossing local council boundaries to go to Worcester's historic cathedral, but someone living in Worcester gets a half-fare only as far as the city boundary and has to pay full fare to Malvern to take in the water or walk on the hills.
	The other anomaly is that a pensioner who lived in Worcestershire up until retirement would not have contributed to free bus travel for pensioners, but, upon retirement, if they moved to Birmingham or Dudley, they would immediately benefit from it, and, importantly, vice versa. Indeed, changes in local government boundaries, not unusual in themselves, can lead to changes in entitlement to free bus travel. Universal free bus travel would avoid those problems.
	I know that some in local government believe that the subsidy to pay for pensioner bus fare concessions is not the most effective use of scarce resources. Indeed, the Commission for Integrated Transport shares that view. However, I reject the idea that developing quality partnerships with bus companies and new park and ride sites alone will increase use of public transport by some of the neediest in our society. What use is a park and ride site for a pensioner in Worcester who does not own or drive a car?
	It is no use subsidising bus companies to operate extra services that have no customers. Therein lies nothing but false delivery—more buses but not more bus users. I support quality partnerships as a concept and park and ride at the appropriate site, but not at the expense of what should be a real passport to freedom for pensioners—free bus travel.
	If I were to look at free bus travel purely as a benefit to pensioners, I would compare it with other benefits that the Government give such as the winter fuel allowance. A pensioner in the north of Scotland has considerably more justification for receiving the winter fuel allowance than one living in Cornwall. Climatic differences account for different needs, but we universalise the benefit because it is fair to do so. How can we accept universal winter fuel allowances, yet allow a postcode lottery for free bus travel? We should not do so. My Bill would put an end to that unfair treatment of pensioners in Worcester and other areas alike.
	Question put and agreed to.
	Bill ordered to be brought in by Mr. Michael Foster, Peter Bradley, Mr. Alan Campbell, Mrs. Janet Dean, Mr. Parmjit Dhanda, Mr. David Drew and Mr. James Plaskitt.

Buses (Concessionary Fares)

Mr. Michael Foster accordingly presented a Bill to make provision about concessionary fares on buses for elderly person: And the same was read the First time; and ordered to be read a Second time on Friday 15 October, and to be printed [Bill 133].

Business of the House

Motion made, and Question proposed,
	That, notwithstanding the practice of the House as to the intervals between stages of Bills brought in upon Ways and Means Resolutions, more than one stage of the Finance Bill may be taken at any sitting of the House.—[Dawn Primarolo.]

Eric Forth: Here we have a piece of business that, I am very happy to see from the Order Paper, can take us through until 7 o'clock this evening. Given the importance of the matter, we may want to take up most of that time, although sadly—not untypically but sadly—the Minister has not seen fit to share with us her view of why the motion is necessary. When we have a motion such as this, which the Order Paper rightly allows us until 7 o'clock to debate, rather too frequently the Minister does not even do the House the courtesy of explaining why it is before us. That puts us at something of a disadvantage. We may have to spend some time speculating as to why the motion is on the Order Paper, because the Minister has not seen fit to tell us. At some stage—who knows?—Ministers may learn that, if they were to do us the simple courtesy of explaining what such motions meant and what their intentions were, the subsequent debate could be correspondingly briefer, but sadly, since the Minister has not sought to catch your eye, Mr. Deputy Speaker, we will have to spend a bit of time speculating as to what it is all about.
	I was able to do a modest bit of research on the motion, with, as usual, the help of the Table Office. It was pointed out that the matter is referred to in page 855 of the brand spanking new 23rd edition of "Erskine May", which I strongly recommend to the House. Page 855 refers to
	"Intervals between stages of taxation legislation."
	May I quote briefly from that part of "Erskine May", which sets the context for the debate that will follow and that can run until 7 o'clock? It states that
	"it is a rule of the House that not more than one stage of a bill brought in on a Ways and Means resolution (ie a taxation bill) should be taken on the same day."
	That is on the face of it an explanation of why we have the motion before us. "Erskine May" goes on to say, in its ever helpful way:
	"This is the last remaining expression in the House's practice of what was once a general principle—that the House's agreement to expenditure or to the imposition of taxation should be conditional upon a number of distinct opportunities for discussion."
	In a nutshell, there has been a sad decline in both the ability and, one has to say, the willingness of the House to take these matters as seriously as it should. Ways and Means resolutions have a long history and they usually indicate, or should indicate, that some serious matters are being dealt with. We only have to glance at the Order Paper to see that, following this business, we have three Ways and Means motions—items four, five and six, to which I shall refer in more detail in a moment.
	I assume—the Minister may give us some guidance on this, if she bothers at any stage in the debate to reveal her thinking—that, if we were not to pass the business of the House motion, either none or only one of the following Ways and Means motions could be taken today. I assume that the Government have speculatively, in their usual pushy and presumptive way, put three Ways and Means motions on today's Order Paper, truncated as the debates on them are to 45 minutes—I will refer to that in a moment, too—and that that is contingent on our approving item three.
	One is left to speculate. Were we not to pass the business of the House motion—I ask the House seriously to consider not approving it—could only the first Ways and Means motion be taken today? Would one of the three be taken? Could the Minister pick and choose and suggest which one should be taken before we get on to the Finance Bill itself, about which I will also say a word in a moment? That is the first point at issue.
	I have been guided by "Erskine May" as to the context of the motion. It indicates that, historically, the House of Commons has always wished to be able to dwell on these financial matters at proper length and in proper detail, which is entirely appropriate because, as we know, historically, one of the main roles of the House has been to represent the taxpayer vis-à-vis the Government of the day and to give proper and serious consideration to matters arising from both taxation and expenditure, which is the whole point of Ways and Means.
	Of course, we have before us three Ways and Means motions, although speculatively so, because until we determine the business motion under discussion, we will not know which of those motions we will discuss, or whether we will be able do so. The first is headed, "Rent factoring of leases of plant or machinery", and states:
	"That provision may be made in the Finance Bill for the purposes of income tax and corporation tax in relation to arrangements for the transfer of a person's right to receive rentals under a lease of plant or machinery."
	That strikes me as a matter of some substance and importance, which the House might want to dwell on. Sadly, however, we are constrained to a mere 45 minutes in which to debate it in its totality. That fact alone ought to concern the House considerably.
	It appears that the Government want us then to move on rapidly, and to consider motion 5, on "Manufactured dividends and interest". It states:
	"That provision may be made in the Finance Bill in relation to payments, and deemed payments, by companies of . . . manufactured dividends . . . manufactured interest, or . . . manufactured overseas dividends".
	I assume that my hon. Friends on the Front Bench are champing at the bit to get stuck into these very important matters, and they doubtless have a lot to say about them. But sadly, the House—never mind my hon. Friends—will be allowed only 45 minutes in which to debate them, before it will then perforce be asked by the Government to move on to yet another Ways and Means motion, which is headed, "Gifts etc. of shares, securities or real property to charities". It states:
	"That provision may be made in the Finance Bill amending section 587B of the Income and Corporation Taxes Act 1988."
	I do not want to attempt at this stage to go into the detail of these Ways and Means motions, and you would not want me to do so, Mr. Deputy Speaker. Such a discussion awaits a later point in the day—perhaps after 7 o'clock this evening. Bearing it in mind that this debate, quite properly, can take us through until 7 o'clock, my hon. Friends might be able to go off and have lunch, afternoon tea and perhaps an early supper before they even have a chance to debate the three motions—or perhaps only one of them, should we fail to agree to the motion before us.
	I wanted to mention that point to give the House some idea of the way in which we are being asked to consider these important Ways and Means motions. We are being given only 45 minutes to discuss each of them, which is a sad reflection on the extent to which the Government now say to the House of Commons, "Never mind your historic role in protecting the taxpayer, and in overseeing expenditure through Ways and Means resolutions; we are giving you only 45 minutes in which to debate each of these very important financial matters." That is to say nothing of what follows.
	We should remember the context as indicated in "Erskine May", which states
	"that the House's agreement to expenditure or to the imposition of taxation should be conditional upon a number of distinct opportunities for discussion."
	That statement is made a nonsense of when we come to the Finance Bill proper, following these Ways and Means motions. On glancing at today's selection list, I see that there are no fewer than 21 groups of amendments and new clauses, of which 14 contain Government amendments and new clauses. They cover matters as vital as anti-avoidance, gifts to charities, overseas pension schemes, stamp duty land tax, disabled persons, individual savings accounts and personal equity plans, and fuel duty, to mention but a few.
	The House is faced with the potential for debating a very wide variety of matters, contingent on the motion that we are considering. So we have to ask ourselves whether we are content with the motion before us, which contains the phrase,
	"notwithstanding the practice of the House as to the intervals between stages of Bills brought in upon Ways and Means Resolutions".
	In the good old days, the House was able properly to pause between considering such very important matters, to take time for reflection and perhaps for consultation with legitimate outside interests, and to give an opportunity for amendments to be considered. Now, of course, the Government—who are contemptuous, as ever, sadly, of the role of the House of Commons in these matters—want simply to steamroller us through all these motions in very quick succession if, and only if, we agree to the business motion.
	It surely would have helped us in considering this motion if the Minister had done us the courtesy of first explaining why we have to compress these matters in the way suggested in the motion. Given that our business here is conducted in the full gaze of the public, I doubt whether I am giving away a great secret by pointing out that a mere glance at the Order Papers of the past few weeks reveals that we are not exactly being hard pressed in terms of the business before us; indeed, the same is true of Order Papers for the weeks to come. The Government's legislative programme seems almost to have dried up, and we have a succession of Adjournment debates. Very welcome such debates may be, but that does not suggest to me that there is enormous pressure on the House's time or on legislative time—quite the opposite.
	It was surely incumbent on Ministers at the very least to explain to us why, under the terms of the motion before us, they want to compress the business in this way. There is surely ample time and opportunity, given the totality of the Order Papers for this and succeeding weeks, to consider these matters in the traditional way—

Mr. Deputy Speaker: Order. The right hon. Gentleman may be anticipating my intervention. I hate to suggest this, but it is just possible that he is misinterpreting the motion. It deals with the difference in stages of the Bill, so what he has been saying about the Ways and Means motions is not relevant to the motion before us. The only point that the motion deals with is the question of the separation between Third Reading and the consideration stage.

Eric Forth: I am most grateful to you, Mr. Deputy Speaker. You have, in your inimitable way, performed the task that I had hoped the Minister would perform. I initiated this debate—which can of course run until 7 o'clock, as you well know—for the sole reason that the Minister had not done us the courtesy of offering any explanation as to the point of, or reason for, the motion. I was therefore left to speculate, as I explained at the beginning of my speech, and you have rightly pointed out that I am speculating now. But I hope that you will understand that I was forced to do so, simply because the Minister had not done us the courtesy of saying even a few words, as you yourself have done so elegantly, to explain the point of the motion.
	If you are telling me, Mr. Deputy Speaker, that the motion has no relevance to the Ways and Means motions, I of course accept that. I should point out, however, that I am not sure whether you were in the Chair when I quoted from page 855 of the 23rd edition of "Erskine May", which you have doubtless already committed to memory. I shall re-read it into the record, because doing so will help you and the Clerks who keep an eye on us, and it will explain why I was speculating as I did. It states that
	"it is a rule of the House that not more than one stage of a bill brought in on a Ways and Means resolution (ie a taxation bill) should be taken on the same day."
	That is what led me—erroneously, as it turns out—to refer to the Ways and Means motions on the Order Paper. Indeed, that was the very point on which I sought guidance in "Erskine May", to which I was guided by no less than the Clerks in the Table Office. I am not suggesting for a minute that that guidance is in any way at odds with your guidance to me, Mr. Deputy Speaker, but you can see how I might have misinterpreted such guidance, in the absence of any help from the Minister. However, you have been very helpful in that regard.
	We are then left to speculate further as to why this motion had to be included on the Order Paper. If it has no bearing on, or relevance to, the Ways and Means motions and relates only to the Finance Bill itself—and given that we have several days in which to deal with the Bill, on consideration of which, happily, no time limit has been imposed—one is left even more in the dark as to why we need this business motion at all. Given the leisurely nature of the way in which we can tackle these matters, and given the 21 groups of amendments—no fewer than 14 of which contain Government amendments and new clauses—I should have thought that there was ample opportunity for debate on today's business before Third Reading, which will not come until a subsequent day. Therefore, I am still in the dark.
	If this little episode illustrates nothing else, I hope that it illustrates again to Ministers that if they had the respect for the House that I still hope they will develop one of these days, however belatedly, they would find it easier to come to the House and give a brief explanation of a motion, which then might not have to be debated. It might be that the Minister's eloquence is sufficient to persuade us that a motion is straightforward and reasonable and that we need not concern ourselves with it. Ministers have not done that, so innocent souls such as myself are obliged to seek to catch your eye, Mr. Deputy Speaker, to speculate, as I have done today. I still think that that is a healthy expression of the interests of the House in the matter. Would that the House, frankly, were full of people who share my concerns, but that is not the fashion of the moment, I regret to say; perhaps it will come back one day.
	I hope that, given the questions I have raised, notwithstanding your helpful advice, Mr. Deputy Speaker, the Minister might see fit, even as a courtesy—maybe to me; certainly to the House—to get to her feet and give us an explanation of the motion. That would be my simple request and I hope that I will be satisfied by what she says.

Dawn Primarolo: I am surprised, to put it mildly, by the comments of the right hon. Member for Bromley and Chislehurst (Mr. Forth). I understand that he entered the House in 1983; I did so in 1987. I do not recall a Minister ever speaking at the Dispatch Box on a motion to allow Committee, Report and Third Reading to take place over two days, as agreed through the usual channels. This is a procedural motion that has always gone through in this fashion. I was advised that, procedurally, this is what I should do. The motion allows us to spend today and tomorrow on Committee and Report, completing Third Reading tomorrow. If that offends the right hon. Gentleman I apologise, but his memory is clearly shorter than mine.
	Question put and agreed to.

FINANCE BILL [WAYS AND MEANS]

Rent factoring of leases of plant and machinery

Dawn Primarolo: I beg to move,
	That provision may be made in the Finance Bill for the purposes of income tax and corporation tax in relation to arrangements for the transfer of a person's right to receive rentals under a lease of plant or machinery.
	The resolution paves the way for a new anti-avoidance provision relating to a newly devised arrangement for the sale of rental streams from leased plant or machinery. The new avoidance schemes have emerged since the Budget, hence the need for the resolution, and depend on selling taxable lease-rental streams for sums on which tax will not be payable.
	The new provision, which will have effect where arrangements to sell the right to the income stream are entered into on or after 2 July, will ensure that the sums received from the sale of such rental streams are brought into account when computing income for tax purposes.
	Question put and agreed to.

FINANCE BILL [WAYS AND MEANS]

Manufactured dividends and interest

Dawn Primarolo: I beg to move,
	That provision may be made in the Finance Bill in relation to payments, and deemed payments, by companies of—
	(a) manufactured dividends,
	(b) manufactured interest, or
	(c) manufactured overseas dividends,
	within the meaning of Schedule 23A to the Income and Corporation Taxes Act 1988.
	The resolution covers provisions in the Finance Bill that prevent companies from avoiding corporation tax by entering into a range of artificial arrangements that involve manufactured payments.
	The arrangements vary in detail, but usually involve claiming tax relief for a manufactured payment while arranging for any counterbalancing income or gains to escape taxation in some way.The clause works by introducing an unallowable purpose rule for manufactured payments. The rule denies tax relief for the manufactured payment to the extent that payment is attributable to the unallowable purpose.
	Where tax avoidance is the main, or one of the main, motives behind a company entering into these arrangements, it will be denied a tax deduction, thereby defeating the avoidance. The measure will apply to manufactured payments made on or after 2 July 2004, subject to transitional provisions for payments made under arrangements already in place.
	Question put and agreed to.

FINANCE BILL [WAYS AND MEANS]

Gifts etc. of shares, securities or real property to charities

John Healey: I beg to move,
	That provision may be made in the Finance Bill amending section 587B of the Income and Corporation Taxes Act 1988.
	The resolution paves the way for an amendment to section 587B of the Income and Corporation Taxes Act 1988 to restrict the value of income tax relief available in relation to a gift of shares or securities to charity to the net amount by which the charity benefits, rather than the market value. We will debate this as new clause 11.
	The amendment has become necessary because we have recently uncovered evidence of a scheme using a complex arrangement of trusts and options to manipulate the value of gilts donated to charities. The scheme aims to achieve tax relief for the individual making a donation at negligible cost and negligible benefit to the charity, and it has the potential of returning virtually the whole value of the gift to the control of the individual. There is potentially no limit on the amount of tax relief at stake. This is an unacceptable abuse of legislation designed to provide additional giving to charity.
	Question put and agreed to.

Orders of the Day
	 — 
	Finance Bill
	 — 
	[1st Allotted Day]

As amended in the Committee and in the Standing Committee, considered.

Dawn Primarolo: I beg to move,
	That the Finance Bill, as amended, be considered in the following order, namely, new Clauses, amendments relating to Clauses 1 to 4, Schedule 1, Clauses 5 to 19, Schedule 2, Clauses 20 to 28, Schedule 3, Clause 29, Schedule 4, Clause 30, Schedule 5, Clauses 31 to 41, Schedule 6, Clauses 42 to 47, Schedule 7, Clause 48, Schedule 8, Clause 49, Schedule 9, Clauses 50 to 52, Schedule 10, Clauses 53 to 64, Schedule 11, Clauses 65 to 76, Schedule 12, Clauses 77 and 78, Schedule 13, Clauses 79 and 80, Schedule 14, Clauses 81 to 84, Schedule 15, Clause 85, Schedule 16, Clauses 86 to 92, Schedule 17, Clause 93, Schedule 18, Clause 94, Schedule 19, Clause 95, Schedule 20, Clauses 96 to 116, Schedule 21, Clause 117, Schedule 22, Clauses 118 to 134, Schedule 23, Clause 135, Schedule 24, Clauses 136 to 141, Schedule 25, Clause 142, Schedule 26, Clause 143, Schedule 27, Clauses 144 to 162 and 164, Schedule 28, Clauses 163 and 165, Schedule 29, Clauses 166 to 175, Schedule 30, Clauses 176 to 200, Schedule 31, Clauses 201 to 212, Schedule 32, Clauses 213 to 275, Schedule 33, Clauses 276 and 277, Schedule 34, Clauses 278 and 279, Schedule 35, Clause 280, Schedule 36, Clauses 281 to 290, Schedule 37, Clauses 291 and 292, Schedule 38, Clauses 293 to 296, Schedule 39, Clauses 297 to 317, new Schedules, amendments relating to Clause 318, Schedule 40 and Clauses 319 and 320.
	The motion allows us to progress through the Bill in the normal way, starting at clause 1. I hope that that is clear to the right hon. Member for Bromley and Chislehurst (Mr. Forth).
	Question put and agreed to.

New Clause 9
	 — 
	Rent factoring of leases of plant or machinery

'(1)   After section 785 of the Taxes Act 1988 insert—
	"785A   Rent factoring of leases of plant or machinery
	(1)   This section applies in any case where the following conditions are satisfied—
	(a)   a person (call him "P") is entitled to receive rentals under a lease of plant or machinery,
	(b)   the rentals, so far as receivable by him, fall to be brought into account as income for the purpose of calculating his tax liability,
	(c)   P enters into arrangements for the transfer of his right to receive some or all of the rentals to another person,
	(d)   apart from this section, some or all of the amount or value of the consideration for the transfer ("the relevant portion of the consideration") would fall to be brought into account neither—
	(i)   as income, nor
	(ii)   as a capital allowances disposal receipt,
	for the purpose of calculating P's tax liability.
	(2)   In any such case, the relevant portion of the consideration—
	(a)   shall be treated for tax purposes as income of P,
	(b)   shall be taxable as rentals receivable by P under the lease (apart from any transfer of his right to receive some or all of the rentals), and
	(c)   shall be brought into account in a period of account to the extent that it is receivable in that period of account.
	(3)   Any reference to the transfer from P to another person of a right to receive rentals includes a reference to any arrangement under which rental ceases to form part of the receipts taken into account as income for the purposes of calculating P's tax liability.
	(4)   Where P is a partnership, any reference in this section to calculating P's tax liability includes a reference to calculating the tax liability of the partners, notwithstanding that the partnership has legal personality.
	(5)   A partnership has legal personality for the purposes of subsection (4) above if it is regarded as a legal person, or as a body corporate, under the law of the country or territory under which it is formed.
	(6)   In this section—
	"capital allowances disposal receipt" means a disposal receipt within the meaning of Part 2 of the Capital Allowances Act 2001 (see section 60 of that Act);
	"lease" includes an underlease, sublease, tenancy or licence and an agreement for any of those things;
	"tax liability" means liability to income tax or corporation tax.".
	(2)   The amendment made by this section has effect where arrangements for the transfer from one person to another of a right to receive rentals are entered into on or after 2nd July 2004.'.—[Dawn Primarolo.]
	Brought up, and read the First time.

Dawn Primarolo: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss Government new clause 10—Manufactured payments under arrangements having an unallowable purpose.

Dawn Primarolo: As I explained briefly with regard to the ways and means motions, the new clauses introduce anti-avoidance measures to prevent a loss of tax through arrangements involving leasing and manufactured payments.
	New clause 9 prevents the new avoidance using arrangements that are being marketed in an attempt to get around the impact of clause 134 of the Bill, which was introduced to prevent tax avoidance through sale and finance lease-back and lease and finance lease-back generating double benefits. Aggressive new schemes are now being marketed, which aim to achieve a similar result by generating a tax-free sum from the sale of rental income streams from the leasing of plant and machinery. The measure will ensure that the proceeds from the sale of such income streams are taxable as rental income, making the new arrangements ineffective.
	New clause 10 will prevent companies from avoiding corporation tax by entering into a range of artificial arrangements involving manufactured payments. The arrangements vary in detail, but usually involve claiming tax relief for a manufactured payment while arranging for any counterbalancing income or gains to escape taxation in some way. The new clause works by introducing an unallowable purpose rule for manufactured payments. The rule denies tax relief for the manufactured payment to the extent that the payment is attributable to the unallowable purpose. To the extent that tax avoidance is a main motive, or one of the main motives, behind a company entering into those arrangements, it will be denied a tax deduction for the manufactured payment, thereby defeating the avoidance.
	As was noted in 1996, when the original loan relationships unallowable purpose rule was introduced, companies entering into the arrangement with the primary aim of avoiding tax will inevitably be aware of the fact. The transactions against which the rule is aimed are not the sort that companies stumble into inadvertently. Provided that companies enter into arrangements involving manufactured payments for genuine commercial reasons, they should have nothing to fear from this unallowable purpose rule. That will be confirmed in guidance issued by the Inland Revenue today. If, however, companies go in for artificial tax-driven arrangements, they may and should find themselves caught.
	As I said when the new measures were introduced, we will not allow the efforts of the tax-avoidance industry to undermine the will of Parliament or allow a small minority of businesses and individuals to get round the tax system at the expense of the vast majority who pay their fair share. We are determined to stamp out this type of tax avoidance and create a level playing field for all. The new clauses will assist in achieving that objective, and I commend them to the House.

Howard Flight: On the face of it, these two anti-avoidance clauses are perfectly reasonable and, indeed, a fair cop. I would, however, make the point that we have had 180 and more new clauses and amendments tabled for Report, which has left quite insufficient time for the various professionals to pore over them in detail to ensure that there are no unintended effects. I note that the Paymaster General mentioned that the guidance notes would only be published today, so there is clearly no chance to review those guidance notes ahead of reviewing the two new clauses. It also struck me that the measures being blocked by new clause 9 are, to some extent, a reaction to what have been seen as retrospective changes in the tax position relating to sales and lease-backs.
	As to the territory of new clause 10, the key issue is how the unallowable purpose rules will work. The Paymaster General is quite right to say that people will know when they are doing things essentially to avoid taxation. There are many circumstances—the use of swaps, forward sells and various other financial instruments—where sound commercial purpose may go hand in hand with paying less rather than more tax. The unallowable purpose rule is yet to be tested either here or in loan relationship legislation.
	We have not spotted anything in the two measures that would have unintended effects. There are many other avoidance measures in the Bill where unintended effects have not been adequately dealt with, but these new clauses appear to be perfectly practical measures. It is good to see the Revenue spotting these measures, which it might have done more diligently in other respects. If it had, we would not have needed the somewhat over-heavy reporting of anti-avoidance tax planning, which we will deal with later in the Bill.

David Laws: We support the two new clauses. The only question for the Paymaster General—I hope I did not miss the point in her earlier comments—is how the Treasury identified these abuses, particularly when she indicated in respect of new clause 9 that the abuses seem to have arisen very recently, even since the Finance Bill was first drafted. Will she say a little more about that?

Quentin Davies: I start by endorsing the hon. Gentleman's last suggestion. It would be helpful if, when the Government bring forward last-minute measures to deal with tax-avoidance schemes, they could describe in more concrete detail what the schemes actually consist of.
	I have no problem in principle with new clause 9. I must say, however, that I am surprised. I have learned to my surprise this afternoon that, at the present time and until we change the position by passing the new clause, revenues that a company generates by selling its entitlement to lease rentals are not taken into account for the purpose of computing tax liabilities. In other words, those revenues do not feature in the computation of taxable profits. That seems very surprising. Usually, if a company discounts or factors its receivables, the amount of money that it receives from those receivables is a revenue and if the costs of generating those revenues mean less profit, the profit is taxable in the normal way. I am surprised that this particular anomaly should have arisen in the first place. It would all be less surprising if the Paymaster General were a little more explicit in telling the House about the type of scheme that she or her officials have identified and targeted.
	I believe that we should not allow new clause 10 to slip by without any comment. Once again, we see the introduction of a general anti-avoidance rule—no, perhaps not a general anti-avoidance rule because that would be general, but an anti-avoidance rule. It is becoming an ever more frequent feature of our taxes legislation. There are similar examples in the current Finance Bill where the Government have had recourse to a specific anti-avoidance rule. In this instance, the anti-avoidance rule is in new clause 10(5).
	At some point, we need the Government to make a clear statement of their views on anti-avoidance rules. Otherwise, we will find that, through adopting the anti-avoidance rule approach in a large number of individual cases, we have introduced a general anti-avoidance rule by the back door. At the end of the day, we will have an anomalous tax system in which anti-avoidance rules apply to certain activities, but not others. It will be unclear to the public and to Parliament—it is certainly unclear to me—on what principles it has been decided that certain types of transactions, trades, professions or businesses encounter anti-avoidance rules, but not others. It is a major philosophical point, and it must be dealt with—if not now, at some other stage—by the Government. There is an increasing lack of clarity on the matter, as the Government have recourse to more and more of these rules in specific cases.
	The second issue raised by the anti-avoidance rule approach is the classic one of unfairness. Great unfairness can arise in individual cases precisely because of the subjectivity of a tax inspector saying that someone acted not for commercial but for anti-avoidance purposes. The taxpayer might respond by denying that. It may be clear and a fair cop in some cases, but not in others. A tax inspector may decide to apply the rule in good faith, but perhaps the taxpayer resists with equal good faith on the basis of the facts. Those matters will have to be resolved by jurisprudence, by the commissioners or the courts. Will the Paymaster General say what guidance is being given to tax inspectors on the application of the rule? That is an extremely important matter. Information about the guidance should be in the public domain, as there is no point in cluttering up the commissioners or the courts with disputes that could be avoided. I am sure that, like everyone else, the Paymaster General would not want unfairness to arise as a result of the application of the rules.
	The third point is another classic problem raised by anti-avoidance rules. What provision has been made for pre-transaction rulings? If a company feels that it might fall foul of the anti-avoidance rule, equity demands that it have the opportunity to clear a transaction with the Revenue in advance. That company might want to adopt a certain course of action, with a perfectly honest commercial purpose in mind. It would not want to be hit, retrospectively, with an anti-avoidance rule. It would be neither satisfactory nor fair for the Revenue to say subsequently that the company should have done X rather than Y, and then clobber it accordingly. That is not a transparent tax system.
	When the Government introduce anti-avoidance rules, they should make it clear that a pre-transaction ruling facility will be available. I hope that the Paymaster General, when she replies to the debate, will confirm that that will be the case. Such a facility must be available to taxpayers in a reasonable time, so that businesses that might fall foul of the rule can clear the position, in anticipation, with the Revenue.

Dawn Primarolo: I shall begin by dealing with the series of questions posed by the hon. Member for Grantham and Stamford (Mr. Davies), who wanted to know whether these proposals amounted to the introduction of a general anti-avoidance rule. I assure him that they do not. The rule is targeted at a narrow area of tax in which abuse, unfortunately, is rife. I shall then move to the question, raised by the hon. Member for Yeovil (Mr. Laws), of when and how the Revenue became aware of two specific schemes.

Quentin Davies: I hope that the Paymaster General does not proceed on a false premise. I said in my remarks that this is not a general anti-avoidance rule, as such a rule would apply, by definition, to all transactions. However, with this new clause—and the same thing happens elsewhere in the Bill—the Government seem to want have recourse to individual anti-avoidance rules. As a result, a series of anti-avoidance rules is being built up in the tax system in a pretty haphazard fashion.
	There seems to be no rhyme, reason or principle to determine which transactions qualify under the rule. I said that that raises philosophical problems and policy issues, and that practical difficulties would arise. I would be grateful for a statement about the Government's attitude to a general anti-avoidance rule before we get halfway there by the back door as a result of a build-up of specific anti-avoidance rules.

Dawn Primarolo: I remind the hon. Gentleman that the Government consulted in 1998 or 1999 about whether a general anti-avoidance rule should be introduced, with the pre-clearance mechanism that he rightly says would be necessary. The consultation was generated by the frustration—also experienced by the previous Government—that ever more complex avoidance schemes give rise to ever more complex legislation to counter them. The clauses under discussion are examples of our approach.
	Extensive consultation was held on whether a general anti-avoidance rule was needed or whether what is called a "mini-GAR" would be sufficient. Another question was whether the Government should deal with avoidance by measures that were specifically targeted, as the previous Conservative Government did.
	The result of the consultation showed that businesses did not want the general anti-avoidance rule, although respondents were divided on the matter. Businesses did not want a mini-GAR either. At that time, the Government were dealing with an anti-avoidance method in respect of value-added tax. We decided not to go with a general anti-avoidance rule in that case, but we said that we would keep the matter under review.
	The hon. Member for Grantham and Stamford will be aware that the Bill contains clauses on the disclosure of information. The Government are still valiantly trying to achieve a principled position in the matter, and I hope that the hon. Gentleman will agree with our approach. He was right to say that this is a grey area. Our aim is to target avoidance, without affecting reasonable commercial transactions. A general anti-avoidance rule can be a very blunt instrument.
	New clause 10 deals with manufactured dividends, a point raised by the hon. Member for Yeovil. Officials made it clear to me in May that such dividends were a possibility. I regret that I cannot be more specific about the date. I agree that we need an arrangement to deal with the matter, and that we need to allow enough time for proper consideration.
	On further investigation, it became clear that a great deal of revenue was at stake. A number of schemes, in various stages of development, were identified. They are very complex, and I am sure that the hon. Member for Yeovil will excuse me if I do not read them into the record. However, I should be happy to send him two examples of the main form that those schemes take.
	As always, my officials and I looked to achieve consistency across the tax system. Our approach was to establish how the previous Government had responded to the problems that they encountered. That Government introduced the unallowable purpose rule—even though they said in 1996 that no such rule would be brought in—and it has worked. It is part of the system now, and it deals with specific problems that arise in connection with manufactured dividends. Although I cannot predict what tax planners will do in the future, the unallowable purpose rule also seeks to preserve transactions that are not undertaken for the purposes of tax avoidance.
	In Standing Committee, the Government's view was made clear that the disclosure methods contained in the Bill would put the Inland Revenue in a better position to be aware of schemes as they are being developed, rather than only when they have been used. The Inland Revenue guidance in respect of the unallowable purpose provision is well used and understood. It is used by tax inspectors, and it is also published for the benefit of companies and their advisers.
	I turn to new clause 9. Clause 134 seeks to prevent avoidance, and the need for the clause was generally accepted in Committee. Subsequently, schemes have been designed to negate clause 134. That is the bind we are in: the Government consult and publish a Bill, and while it is making progress through the various stages, other people are planning how to negate it. Therefore, clause 134 would not protect the revenue that it was designed to protect. New clause 9 would ensure that the scheme designed to negate clause 134—which has not even been used yet, because clause 134 has not come into force—would not be effective.
	I feel the same frustration as other Members at the need for Treasury Ministers to act in that way, but such is the problem of the creativity of a small number of accountants, tax planners, legal professionals and companies. If they are not held in check, they are capable of ensuring that the Treasury loses vast amounts of revenue. That is why we needed the ways and means resolutions earlier and that is why I was unable to introduce the new clauses in Committee as I should have preferred. A responsible Minister must protect the Treasury and all honest taxpayers, and that is what new clauses 9 and 10 seek to do.
	Question put and agreed to.
	Clause read a Second time, and added to the Bill.

New Clause 10
	 — 
	Manufactured payments under arrangements having an unallowable purpose

'(1)   In Schedule 23A to the Taxes Act 1988 (manufactured dividends and interest) after paragraph 7 (irregular manufactured payments) insert—
	"Manufactured payments under arrangements having an unallowable purpose
	7A   (1)   This paragraph applies in any case where—
	(a)   a manufactured payment falls to be made by a company in an accounting period in pursuance of any arrangements (see sub-paragraphs (9) and (10) for definitions), and (b)   the arrangements have an unallowable purpose at any time (see sub-paragraphs (3) to (5)).
	But this is subject to sub-paragraph (8) below (cases where tax relief is denied apart from this paragraph).
	(2)   The company is not entitled, by virtue of anything in this Schedule or any provision of regulations under it, or otherwise, to any relevant tax relief (see sub-paragraph (10)), to the extent that the relief is in respect of, or referable to, the whole or any part of so much of the manufactured payment as, on a just and reasonable apportionment, is attributable to the unallowable purpose.
	(3)   Arrangements have an unallowable purpose at any time if at that time the purposes for which the company is a party to—
	(a)   the arrangements,
	(b)   any related transaction (see sub-paragraphs (6) and (7)), or
	(c)   any transaction in pursuance of the arrangements,
	include a purpose ("the unallowable purpose") which is not among the business or other commercial purposes of the company.
	(4)   The business and other commercial purposes of a company do not include the purposes of any part of its activities in respect of which it is not within the charge to corporation tax.
	(5)   Where one of the purposes for which a company is at any time a party to—
	(a)   any arrangements,
	(b)   any related transaction in the case of any arrangements, or
	(c)   any transaction in pursuance of any arrangements,
	is a tax avoidance purpose, that purpose shall be taken to be a business or other commercial purpose of the company only where it is not the main purpose, or one of the main purposes, for which the company is party to the arrangements or transaction at that time.
	(6)   One or more transactions are to be regarded as related transactions, in the case of any arrangements, if it would be reasonable to assume, from either or both of—
	(a)   the likely effect of the transactions, and
	(b)   the circumstances in which the transactions are entered into or effected,
	that none of the transactions would have been entered into or effected independently of the arrangements.
	(7)   Transactions are not prevented from being related transactions, in the case of any arrangements, just because the transactions—
	(a)   are not between the same parties, or
	(b)   are not between the parties to the arrangements.
	(8)   This paragraph does not apply if, as a result of any of the following provisions—
	(a)   section 75(4)(b) (expenses of management of companies with investment business: unallowable purposes),
	(b)   section 76(4)(d) (expenses of insurance companies: unallowable purposes),
	(c)   paragraph 13 of Schedule 9 to the Finance Act 1996 (loan relationships with unallowable purposes),
	the company in question is not entitled to a relevant tax relief in respect of, or referable to, the whole or any part of the manufactured payment.
	The references to sections 75 and 76 are references to those provisions as they have effect in relation to accounting periods beginning on or after 1st April 2004.
	(9)   Any reference in this paragraph to a manufactured payment falling to be made by a company includes a reference to a manufactured payment which is deemed by or under any provision of the Tax Acts to be made by a company (and references to a transaction, or to a company being party to a transaction, are to be construed accordingly).
	(10)   In this paragraph—
	"arrangements" includes schemes, arrangements and understandings of any kind, whether or not legally enforceable, and shall be taken to include any related transactions;
	"manufactured payment" means any of the following—
	(a)   any manufactured dividend;
	(b)   any manufactured interest;
	(c)   any manufactured overseas dividend;
	"related transaction" shall be construed in accordance with sub-paragraphs (6) and (7) above;
	"relevant tax relief" means any of the following—
	(a)   any deduction in computing profits or gains for the purposes of corporation tax;
	(b)   any deduction against total profits;
	(c)   the bringing into account of any debit for the purposes of Chapter 2 of Part 4 of the Finance Act 1996 (loan relationships);
	(d)   the surrender of an amount by way of group relief;
	"tax advantage" has the same meaning as in Chapter1 of Part 17 (tax avoidance);
	"tax avoidance purpose" means any purpose that consists in securing a tax advantage (whether for the company in question or any other person);
	and sub-paragraphs (3) to (7) above have effect for the purposes of this paragraph.".
	(2)   In section 95 of the Taxes Act 1988 (taxation of dealers in respect of distributions etc) before subsection (2) insert—
	"(1C)   The application of subsection (1) above in relation to a payment made by a dealer is subject to paragraph 7A of Schedule 23A (manufactured payments under arrangements having an unallowable purpose).".
	This amendment has effect on and after the commencement date.
	(3)   The amendment made by subsection (1) has effect—
	(a)   in the case of new arrangements, in relation to manufactured payments made, or deemed by or under any provision of the Tax Acts to be made, on or after the commencement date, and
	(b)   in the case of old arrangements, in relation to manufactured payments made, or deemed by or under any provision of the Tax Acts to be made, on or after the day on which this Act is passed.
	(4)   But where—
	(a)   as a result of old arrangements, any income arose or accrued, or any gain accrued, to a company before the commencement date,
	(b)   the income or gain is or was within the charge to corporation tax, and
	(c)   a manufactured payment in pursuance of the arrangements is made, or deemed by or under any provision of the Tax Acts to be made, by the company on or after the day on which this Act is passed,
	the amendment made by subsection (1) does not have effect in relation to so much of the manufactured payment as (on such just and reasonable apportionments as may be necessary) represents the income or gain.
	(5)   For the purposes of subsection (4)—
	(a)   "income" includes any income deemed by or under any provision of the Tax Acts to arise or accrue,
	(b)   "gain" includes any gain deemed by or under any provision of the Tax Acts to accrue.
	(6)   In this section—
	"the commencement date" means 2nd July 2004;
	"new arrangements" means any arrangements other than old arrangements;
	"old arrangements" means arrangements which were, or some part of which was, entered into or acted upon before the commencement date.
	(7)   For the purposes of subsection (6), the cases where arrangements were, or some part of any arrangements was, acted upon before the commencement date are those cases where a transaction in pursuance of the arrangements, or of any part of the arrangements, has taken place before that date.'.—[Dawn Primarolo.]
	Brought up, read the First and Second time, and added to the Bill.

New Clause 11
	 — 
	Gifts of shares, securities and real property to charities etc

'(1)   Section 587B of the Taxes Act 1988 (gifts of shares, securities and real property to charities etc) is amended as follows.
	(2)   For subsection (4) (the relevant amount) substitute—
	"(4)   Subject to subsections (5) to (7) below, the relevant amount is an amount equal to—
	(a)   where the disposal is a gift, the value of the net benefit to the charity at, or immediately after, the time when the disposal is made (whichever time gives the lower value);
	(b)   where the disposal is at an undervalue, the amount by which—
	(i)   the value described in paragraph (a) above, exceeds
	(ii)   the amount or value of the consideration for the disposal,
	or, if there is no such excess, nil.
	(3)   After subsection (8) insert—
	"(8A)   The value of the net benefit to the charity is—
	(a)   the market value of the qualifying investment, unless subsection (8B) below applies;
	(b)   where that subsection applies, that market value reduced by the aggregate amount of the related liabilities of the charity (see subsections (8E) to (8G)).
	(8B)   This subsection applies in any case where—
	(a)   the charity is, or becomes, subject to an obligation to any person (whether or not the person making the disposal or a person connected with him), and
	(b)   one or more of the conditions in subsection (8C) below is satisfied.
	(8C)   For the purposes of subsection (8B) above—
	(a)   condition 1 is that, taking into account all the circumstances (including, in particular, the difference in the value of the net benefit to the charity if subsection (8B) applies and if it does not) it is reasonable to suppose that the disposal of the qualifying investment to the charity would not have been made in the absence of the obligation;
	(b)   condition 2 is that the obligation (whether in whole or in part) relates to, is framed by reference to, or is conditional on the charity receiving, the qualifying investment or a related investment (see subsection (8D)).
	(8D)   In subsection (8C) "related investment" means any of the following—
	(a)   any asset of the same class or description as the qualifying investment (irrespective of size, quantity or amount);
	(b)   any asset derived from, or representing, the qualifying investment whether in whole or in part and whether directly or indirectly;
	(c)   any asset from which the qualifying investment is derived, or which the qualifying investment represents, whether in whole or in part and whether directly or indirectly.
	(8E)   For the purposes of this section, the liabilities which are related liabilities in the case of any qualifying investment are the liabilities of the charity under each of the obligations that fall within subsection (8B) above (as read with subsection (8C) above) in relation to that investment.
	(8F)   Where an obligation is contingent and the contingency occurs, the amount to be brought into account for the purposes of this section at any time in respect of the liability, so far as contingent, under the obligation is the amount or value of the liability actually incurred in consequence of the occurrence of the contingency.
	(8G)   Where an obligation is contingent and the contingency does not occur, the amount to be brought into account for the purposes of this section at any time in respect of the liability, so far as contingent, is nil.".
	(4)   In subsection (9) (definitions) insert each of the following definitions at the appropriate place—
	" "obligation" includes a reference to each of the following—
	(a)   any scheme, arrangement or understanding of any kind, whether or not legally enforceable;
	(b)   a series of obligations (whether or not between the same parties);";
	" "related liabilities" shall be construed in accordance with subsection (8E) above;";
	" "value of the net benefit to the charity" shall be construed in accordance with subsection (8A) above;".
	(5)   After subsection (10) (market value) insert—
	"(10A)   Section 839 (connected persons) applies for the purposes of this section.".
	(6)   The amendments made by this section have effect in relation to any disposal to a charity on or after 2nd July 2004, except where the disposal is in performance of a contract entered into before that date and not varied on or after that date.'.—[John Healey.]
	Brought up, and read the First time.

John Healey: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following:New clause 1—Gift aid and non-taxpayers—
	'(1)   Section 25 of the Finance Act 1990 (donations to charity by individuals) shall be amended in accordance with subsection (2) below.
	(2)   In subsection (8)—
	(a)   after "year of assessment" there shall be inserted "by more than £520"; and
	(b)   at the end there shall be added "over £520".
	(3)   This section shall be deemed to have effect for the year 2003–04 and subsequent years of assessment.'.

John Healey: New clause 11 amends legislation providing income tax relief to a donor making a gift, or disposal at under value, of shares or securities to charity. The legislation, introduced in the Finance Act 2002, which was welcomed at the time on both sides of the House, enables a donor to offset the market value of a gift of shares or securities to charity against their income for tax purposes. The market value is the value of the gift in the hands of the donor at the point of disposal to the charity. In the first two years that the relief has been available, £370 million has been donated to charity.
	However, we have uncovered evidence of complex avoidance schemes that severely reduce the benefit of the gift in the hands of the charity, while leaving the market value of the gift for tax purposes unchanged. The schemes operate where an individual makes a "donation" to a charity and, as a result of an obligation on the charity, the value of that donation to the charity is less than the market value of the assets donated. In that context, an obligation on the charity commonly means that the charity will undertake to sell the shares or gilts back to a third party. The effect of such schemes, which use complex arrangements of trusts and options, is to give the donor tax relief that can far outweigh the benefit to the charity and has the scope to return the whole value of the gift to the control of the donor. The charity receiving such a gift is left with very little benefit and, because the gift or an amount of nearly equivalent value returns to the control of the donor, the gift costs the donor much less than the amount of tax relief they claim.
	The purpose of the new clause is to counter abuse not by charities, but by individuals seeking to take advantage of the generous income tax relief available to charity donors. The new clause ensures that the amount of income tax relief claimed by the donor cannot exceed the value of the net benefit to the charity. It will not affect genuine donors or charities. But when an obligation is placed on the charity—no matter by whom—that results in the value of the gift in the hands of the charity being less than the value of the gift in the hands of the donor, the income tax relief that can be claimed by the donor is restricted to the lower amount. That provision will operate either when the obligation can be linked to the assets given, or when it is probable that the gift would not have been made without the existence of the obligation.
	The Government are committed to increasing donations to charity and the gifts of shares and securities legislation is an important part of that commitment. But schemes that seek to abuse charitable reliefs are unacceptable. We have shown with this new clause that when we identify such abuse, we will act quickly to prevent that abuse from continuing.

Howard Flight: rose—

John Healey: I hope that the hon. Member for Arundel and South Downs (Mr. Flight) will welcome the clause as he did the last, as a reasonable and fair cop.

Howard Flight: As I recall, the income tax relief received when one gifts something to a charity is set against one's income for income tax purposes, so it is 40 per cent. for top-rate taxpayers. As I understand the Economic Secretary's description, it would still be worth practising the scheme because the gift to the charity might be two and a half times the effective benefit.

John Healey: We believe that the new clause will prevent such abuse. Our concern is that the amounts that can be donated—and therefore the tax relief that can be claimed—are virtually limitless. We are, however, keen to ensure that we do not introduce a measure that discourages genuine acts of philanthropy or removes the incentive to the donor to give in the first place.

David Laws: In the spirit of the questions I put earlier to the Paymaster General, can the Economic Secretary tell us how long the abuse has been going on and how much it might have cost?

John Healey: As I said earlier, we uncovered evidence of the scheme relatively recently. It is not yet widespread, but it has the potential to become so. As my right hon. Friend the Paymaster General said, a responsible Government have the duty to act as soon as evidence of such schemes is uncovered, to prevent the loss of potentially very large sums. We have uncovered evidence of a potential donation of close to £100 million. If a single donation of such size were to be channelled through the sort of scheme that I have described, the extent of the abuse would be obvious, as would the potential exposure of the public purse.
	The new clause has the support of the Charity Finance Directors Group and the Charities Tax Reform Group. Indeed, the latter says:
	"We welcome this measure which defends the tax breaks designed to encourage giving to charities. Any abuse of charitable reliefs by donors rebounds on the whole charity sector by tarnishing its reputation; we support all initiatives that protect the integrity of the sector."
	I hope that the new clause will receive support from both sides of the House.
	I turn briefly to new clause 1. Opposition Members will recall that we debated this proposal in the Finance Bill Standing Committee in 2002, when I cautioned the hon. Member for Arundel and South Downs that the consequence of such a measure would be to change the nature of gift aid. To understand our objections to new clause 1 we must return briefly to the operating principles of gift aid.
	Gift aid donations are treated as having been made after the deduction of income tax at the basic rate. As charities are exempt from tax on that income, they are entitled to reclaim from the Inland Revenue an amount equal to the basic rate of tax on the donation. If the donor has not paid sufficient income or capital gains tax to cover the amount reclaimed, they are liable to be assessed for the shortfall.
	If the new clause were accepted, it would allow donors to make donations using gift aid on which the amount of income tax treated as deducted from the gift can exceed the amount of income tax or capital gains tax paid by the donor in that year. It would allow an excess of up to £520 before further amounts became recoverable.
	At present, where the tax reclaimed by the charity receiving a gift aid donation does not exceed the amount of income tax and capital gains tax paid by the donor, the repayment is treated as negative taxation. If the tax reclaimed by the charity exceeds the amount paid by the donor, we deal with the situation by making an assessment on the donor, as I said earlier. If, as the new clause proposes, we did not have that option, amounts repaid to charity could exceed tax paid by donors and the whole gift aid scheme would be reclassified as public expenditure. Since our debate in 2002, we have checked that point with the Office for National Statistics, which confirmed that such an extension would indeed represent public expenditure.
	As gift aid acts as an incentive to encourage taxpayers to give to charity, it enables the donor, in effect, to direct some or all of the income and capital gains tax they have paid to causes that they support. New clause 1 would breach the central principle of gift aid if the scheme allowed non-taxpayers to direct where the taxes of others are used. On that basis, I hope that Opposition Members will not press the new clause to a vote.

Richard Bacon: I shall comment briefly on new clause 11. On the face of it, the new clause causes us no great difficulty, although it was tabled rather late and we would have liked longer to consider it. I was at the Vote Office not two hours ago, yet I was unable to obtain any guidance notes on the new clause.
	New clause 11 appears to be a targeted anti-avoidance measure designed to prevent donors from obtaining income tax relief in excess of the benefits received by the charity from the donation of shares or securities. Normally, one would expect the market value of a gift to reflect the value of the gift in the hands of the charity. There is potential for serious abuse; for example, by using offshore trusts and options to manipulate the value of gilts or other securities donated to charities so that the value of the gift in the hands of the charity could bear no, or little, relation to the market value of the underlying asset. Such manipulation could be used to write off entirely an individual's tax liability while conferring only limited benefits, if any, on the charity.
	As genuine gifts of shares and other securities will continue to receive tax relief under new clause 11, we have no objection to it in principle. It appears to be a measure that will protect the Revenue while ensuring that charities continue to benefit from genuine gifts of shares and other securities. We shall, however, be keeping an eye out for unintended consequences.
	The purpose of our new clause 1 is to probe the Government's thinking in the important field of gift aid relief, and the Economic Secretary gave us a hint of his thinking in his remarks earlier. The new clause would ensure that people on incomes too low to tax, who are often the most generous of givers, are able to benefit from the gift aid scheme, and it would remove the charge they unwittingly incur when they mistakenly sign a gift aid form.
	The gift aid relief scheme is a great boon for charities, and it may also be convenient for those who donate to charities, if they pay tax; but for those of the poor who give generously to charity, the gift aid scheme can be a costly and significant trap.Gift aid relief can be claimed only by those who have paid enough tax in the year to cover the amount of tax on the gift, so, for example, if a person gives a gross amount of £100 in a year to a charity using the gift aid scheme, he or she will pay the charity a net sum of £78 and the charity will reclaim from the Inland Revenue basic-rate tax of £22; but the donor must have paid at least £22 tax in the year for that to work. A donor who has not paid enough tax to cover the gift, and still uses the gift aid scheme, remains legally liable to the Inland Revenue for that amount of tax. If the donor were a non-taxpayer, the Revenue would be entitled to pursue them—and sometimes does—for the £22, notwithstanding the fact that the donor was not liable to pay tax for any other reason.
	Non-taxpaying donors might use the gift aid scheme for all sorts of reasons. They might not appreciate the technicalities, and the charity concerned might fail to warn them. Their incomes might decline unexpectedly—for example, if they lose their job, or if interest rates fall, taking them out of tax—and they may forget that they still have a gift aid declaration in place.
	The low incomes tax reform group—the LITRG—which is part of the Chartered Institute of Taxation, has been campaigning since the introduction of the gift aid scheme to enable non-taxpayers to participate in it. Those on low incomes are often among the most generous givers in proportion to their means and, as the LITRG points out, it is not clear why low-income donors should not be encouraged to give to charity in the same way as wealthier donors.
	Indeed, the group had originally thought that that was the Government's intention. When the Chancellor of the Exchequer announced the introduction of "Getting Britain Giving", he said that for every pound a citizen gave, the Government would contribute a further 28p. It is worth noting that the Chancellor said "citizen" not "taxpayer". In the event, however, as the measures have unfolded, we see that higher-rate taxpayers can get relief on their giving—indeed, if they give shares to a charity the relief can approach 80 per cent. in certain circumstances—whereas a charity can get no relief on a gift from a non-taxpayer. That seems a curious inversion of the idea of a progressive tax system. The exclusion of some citizens from the gift aid scheme can hardly be said to contribute to the building of an inclusive or a civic society.
	When the matter was last debated, in the Finance Bill Standing Committee to which the Economic Secretary alluded, the hon. Gentleman gave two welcome assurances. First, he said that in practice, where the Inland Revenue finds that a non-taxpayer's donation has been included in a gift aid claim from a charity, it invites the charity to make good the shortfall rather than pursuing the individual taxpayer. No doubt most charities would respond positively to such an invitation.
	Secondly, the hon. Gentleman undertook to keep the matter under constant review. New clause 1 would enable non-taxpaying donors to use the gift aid scheme when donating, but it would set a limit. It provides that they will not have a legal liability to pay the Revenue any tax reclaimed by the charity, provided that tax on any gifts they make under the scheme during a tax year does not exceed £520, or £10 a week. That restriction is intended primarily to meet the possible objection that fraud might be encouraged if non-taxpayers were able to donate to charity under gift aid without limit. New clause 1 would take effect from the last tax year—2003–04—since tax returns for that year are largely still to be made.
	In the debate to which I referred a moment ago, the Economic Secretary objected—he reiterated his objection this afternoon—because the tax reclaimed by a charity in respect of a gift by a non-taxpaying donor would be effectively public expenditure, not a tax relief. That raises the question of whether the gift aid scheme could be classified in two ways for public accounting purposes: as tax relief to the extent that it is used by taxpayers and as public expenditure to the extent that it might be opened up to non-taxpayers.
	On 9 June 2003, Lord Freeman wrote on behalf of LITRG to the Financial Secretary to ask whether the ONS could consider that question at one of its review meetings, and on 19 June last year, the Economic Secretary replied to that letter, saying that he had arranged for the ONS to give definitive advice. He referred to that advice in his opening remarks, and I ask him to consider publishing it, as I am not aware of seeing it in the public domain.
	It is hard to understand why a split classification should present a problem, given the proliferation of the various tax credit schemes that we have seen under the Government. Those schemes raise very much the same issues as those we are discussing and their total cost is divided between tax relief, on one hand, and public expenditure, on the other, in so far as the credits reduce tax liabilities or lead to payments to claimants.
	In summary, we urge the Government to think again about extending the gift aid scheme to non-taxpayers, to give those on low incomes the opportunity to give to charity as they would wish, to prevent them from falling into what for them could be a costly and unlooked-for trap, particularly where they are ill-advised by the bodies to which they donate, and to simplify generally the administration of the scheme for charities.

John Healey: May I welcome the hon. Member for South Norfolk (Mr. Bacon) to the Dispatch Box? He offers distinguished service to the House on the Public Accounts Committee. I understand that he is making only a temporary appearance at the Dispatch Box, but I fear that his permanent presence cannot be far off, and I look forward to that.
	The hon. Gentleman asks first about guidance. He said that he had looked for guidance published by the Inland Revenue alongside new clause 11. He will appreciate that it is important that the House considers the clause first, but the Inland Revenue will publish guidance to support the new clause. That guidance will give charities some certainty in respect of how the new clause will operate and where they stand. Let me repeat very clearly that this measure is carefully constructed not to discourage genuine philanthropy. It is designed to counter abuse not by charities, but by those individuals who seek to take advantage of what is a generous income tax relief scheme for charitable donors.
	The hon. Gentleman made a number of other points. He took up the cause and case of the non-taxpayer, particularly the non-taxpayer or low taxpayer who may not fully appreciate the principles and operation of the gift aid scheme. I am sure that he will know, as do many hon. Members because many of them are strong supporters and give in this way, that any person who makes a donation under gift aid must complete a declaration to confirm that he or she has paid sufficient tax to cover the amount that the charity will reclaim. The requirement that charities must obtain such a declaration from the donor reduces the risk that the donor will accidentally use gift aid when it is not appropriate.
	Where it is established, however, that a donor has not paid enough tax to cover the value of the gift aid, the Inland Revenue can, as I said, assess the donor to recover that overpayment. However, as the hon. Gentleman said, I gave an undertaking during the proceedings on the Finance Bill in 2002 that, in many cases, the Inland Revenue will explain the situation first to the charity, which will then decide voluntarily to repay the amount of the tax reclaimed.
	The hon. Gentleman spoke about citizenship and asked why non-taxpayers should be barred from donating to charity. Non-taxpayers can give to charity in other ways, but it is not appropriate for them to do so under gift aid. He will be aware that, even for those who pay a small amount of tax, gift aid can apply to any amount no matter how small, so long as some tax is paid, gift aid is a scheme of which the charity can take advantage.
	Finally, the hon. Gentleman urged the Government to think again and referred back to the debates on the Finance Bill in 2002, where I gave an undertaking that, as with all taxes, the Government would keep gift aid under review. We will do so. We are always open to fresh argument and to the case for further reform, particularly with such issues, where we believe that any further measure may boost the amount that people can give to charity, thus encouraging charitable giving more widely. However, as I tried to explain in my opening remarks, the basic objection to new clause 1 is that it contravenes the principles that lie at the heart of the operation of gift aid and that, at present, we simply do not think that that problem has been overcome by the case made by its proponents.

Howard Flight: May I ask the Economic Secretary how new clause 11 will work? He said that the income tax rebate cannot exceed the net value of the benefit to the charity. I am not sure whether or not the net value includes the tax rebate. However, if it does not include the tax rebate, for example, someone could give £100 and take back £80. The charity would get £20. The individual would get back £18 on his £100, so he would be out of pocket by only £2. In effect, that could be used to make all giving to charities tax deductible. If the net value includes the tax rebate to the charity, someone could give £100 and take back £100. The charity could still have £22, and the individual has benefited by £18. I just want to understand whether the new clause will be an effective deterrent to the abuse that the hon. Gentleman describes.

Mr. Deputy Speaker: Order. We are in danger of getting ourselves into disorder. I was assuming that the hon. Gentleman's remarks were by way of a long intervention, to which the Minister may reply in concluding his speech, but if he does not wish to respond that is in order.
	Question put and agreed to.
	Clause read a Second time, and added to the Bill.

New Clause 12
	 — 
	Overseas pension schemes: migrant member relief

'Schedule (Overseas pension schemes: migrant member relief) contains provision about migrant member relief in respect of contributions under overseas pension schemes.'.—[Ruth Kelly.]
	Brought up, and read the First time.

Ruth Kelly: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following: Government new clause 13—Non-UK schemes: application of certain charges.
	Government new clause 14—Appeal against decision to exclude recognised overseas pension scheme.
	Government amendments Nos. 111, 114 to 116, 118, 126 to 131, 133 to 137 and 149.
	Government new schedule 1—Overseas pension schemes: migrant member relief.
	Government new schedule 2—Non-UK schemes: application of certain charges.

Ruth Kelly: The new simplified regime for taxing pensions will provide a more flexible regime that is much less heavily regulated than the existing eight regimes. That should prove attractive to individual pension savers and reduce costs and increase flexibility for the industry. Our aim is to make saving within the new simplified regime as simple, fair and attractive as possible for all pension savers. However, there will be some groups—individuals who come to the UK from overseas—for whom it makes sense not to move into the UK's tax-favoured regime. For example, individuals may prefer to continue to contribute to their home state pension schemes, or might even be obliged to continue to be members of such schemes.
	Under the current regimes, there is provision for individuals to get UK relief for contributions made to their home state schemes. Those provisions are important in maintaining the UK's competitiveness as an attractive place to come to work. Briefly, individuals may currently claim relief for contributions to overseas schemes that correspond to UK schemes either under a double taxation agreement, or the existing corresponding relief rules.
	It is, of course, important to maintain the UK's competitiveness as an attractive place to work and do business. We will therefore be keeping these two routes to relief in the new regime. However, we will simplify and rationalise the conditions for getting relief under the new corresponding relief, which is to be known as migrant member relief in the future. The rights to relief under a double taxation agreement will, of course, remain as they are under the terms of existing agreements. The new rules will ensure that the relief under both routes will have an appropriate fit with the new regime. Government new clauses 12 and 13, which introduce new schedules 1 and 2, and amendments Nos. 111 and 115, provide for these two routes to relief and set out how certain tax charges will apply to overseas schemes.
	New clause 12 and new schedule 1, which it introduces, make provision for individuals and their employers to claim tax relief on contributions to certain overseas schemes. The migrant member relief that they introduce will be available to relevant individuals and their employers. The new rules are more generous than the existing ones for corresponding relief and match the new rules for relief in respect of contributions made to registered pension schemes. We are extending the qualifying criteria, both in terms of the individuals who can qualify for relief, and what constitutes a qualifying overseas pension scheme.
	Internationally mobile overseas individuals who come to the UK to work for a period of time and continue to be members of an overseas pension scheme will be able to claim migrant member relief on pension contributions up to the level of their UK chargeable earnings. Employers will be able to claim tax relief on contributions paid in respect of these employees, and employees will not be taxed on the benefit of an employer's provision of retirement benefits in an overseas scheme. Individuals will be entitled to claim migrant member relief against earnings chargeable to tax in the UK, providing that they come to the UK as a member of a qualifying overseas pension scheme and that they joined that scheme when they were not resident in the UK.
	Additional conditions are that such persons must have been UK residents when they paid the contributions on which relief was claimed, and that they were eligible for tax relief on the contributions in the country in which they were resident immediately before coming to the UK. Finally, individuals must notify scheme managers that they intend to claim migrant member relief. That is important because obligations are placed on scheme managers of qualifying overseas schemes to notify the Inland Revenue that a scheme is such a qualifying scheme. The scheme manager must also notify the Inland Revenue if that stops being an overseas pension scheme, and provide it with information about benefit crystallisation events relating to the individual.
	New clause 13 and new schedule 2, which it introduces, will ensure that certain tax charges will apply in respect of overseas schemes when UK tax relief has been given on amounts in the fund. That will occur when there has been migrant member relief or relief under the terms of a double taxation agreement, or where a transfer has been made from a UK registered scheme to an overseas pension scheme. It is right that if UK tax relief has been given on funds in an overseas scheme, either directly or because funds have been transferred from a UK registered scheme, the same tax charges that apply to relief for UK registered pension schemes should also apply. That meets our objective of maintaining the UK's competitiveness as an attractive place to work and do business while preserving the integrity of the new regime.
	There are three types of charges that might apply to an overseas scheme. First, member payment charges will apply to payments that would give rise to a UK tax charge if they were made from a registered scheme in the UK, such as an unauthorised payments charge, a special lump sum death benefits charge or a charge in respect of trivial commutation. Those charges will apply if individuals are resident in the UK in the year in which the payment is made, or resident in the UK during any of the immediately preceding five years. They will apply only to the extent that the payments are made out of funds that have benefited from UK tax relief. We have provided against double taxation by allowing credit against UK tax for foreign taxes paid in respect of those payments.
	Secondly, the annual allowance provisions will apply to an overseas scheme as if it were a registered scheme to the extent to which the annual increase in individuals' pension rights under the scheme had benefited from UK tax relief. Thirdly, lifetime allowance provisions will apply to funds in an overseas scheme that benefit from UK tax relief on or after 6 April 2006. Additionally, individuals may elect for a benefit crystallisation event to occur when tax relief is no longer claimed, thus allowing individuals who leave the UK permanently to be sure that all UK taxation issues in respect of their overseas schemes are completed.
	Amendments Nos. 114, 116, 118, 126 to 131 and 133 to 137 are merely consequential amendments to the new clauses and schedules. To provide continuity, transitional provisions introduced by amendment No. 149 will ensure that individuals who claim corresponding relief on 5 April 2006 may continue to claim that relief even if either individuals or the scheme would not qualify for relief if applying for the first time under the new rules. However, the scheme manager must comply with benefit crystallisation information requirements in respect of contributions paid after 5 April 2006.
	The new rules are flexible and transparent, and will ensure that the UK remains a competitive place for internationally mobile companies and their employees to do their business and work. They will maintain the integrity of the new regime by creating a level playing field between UK and overseas pension schemes, so I commend the new clauses, new schedules and amendments to the House.

George Osborne: The Financial Secretary said that the measures were simple, fair and attractive, but anyone who has tried to plough through new schedule 2 over the past couple of days would not agree that they were simple. It was not especially fair that the provisions were introduced at the last moment because that meant that the industry did not have the chance to comment on them at all. As for whether they are attractive or not, we will have to take the Financial Secretary's word that they are more generous than the current arrangements.
	My colleagues have already made the point that it is unsatisfactory for new clauses and amendments to be introduced on Report, but it is especially unsatisfactory when they relate to the aspect of the Bill that deals with reform of pension taxation. As the Financial Secretary well knows, that matter has been subject to lengthy consultation over a couple of years, which I praised in Committee as a good example of the way in which to consult because the Government listened and changed their proposals on various occasions in the light of what the industry said. Unfortunately, she has blotted her copybook right at the end of the process by introducing a substantial change to the situation regarding overseas pension schemes without any consultation. The provisions were tabled on Friday and we are discussing them a couple of days after the weekend, so the industry has thus had no chance to have its say. The situation is especially unsatisfactory because we discussed the matter in Committee only a couple of weeks ago. Will the Financial Secretary tell us why the proposals have suddenly appeared on the doorstep so late in the day?
	Will the Financial Secretary tell us something about the missing details? For example, amendment No. 111 is important because it defines an overseas pensions scheme as
	"a pension scheme  . . . which  . . . is established in a country  . . . outside the United Kingdom"—
	one might have guessed that about an overseas pension scheme—
	"and  . . . satisfies any requirements prescribed for the purposes of this subsection by regulations made by the Board of Inland Revenue."
	Are those regulations available so that we can look at and discuss them? Will the Financial Secretary tell us the requirements that will be imposed on those schemes, apart from the fact that they must be overseas pensions schemes?
	Turning to the substance of the Government's proposal and the new concept of migrant member relief, the Financial Secretary implied when discussing new clause 12 and new schedule 1 that the measures were designed for non-UK citizens who came to work in this country. Does she anticipate that they will be used by UK citizens who go to overseas countries in which they enter into pension schemes before coming back to the United Kingdom? She seemed to be talking only in terms of non-UK nationals.
	I accept what the Minister is trying to achieve in new clause 13. The schedule that it would introduce is complex, but explanatory notes have not been produced. When I was dealing with the Pensions Bill many new clauses were introduced on Report—indeed, parts of the Bill were virtually rewritten—but the Department for Work and Pensions produced explanatory notes to clarify what they were doing. There are no explanatory notes, however, for the Finance Bill or, if there are, I have not seen them.
	Government new schedule 2, as the Financial Secretary made clear, is an attempt to ensure that a member of an overseas scheme eligible for UK tax relief cannot evade the rules on, for example, the annual allowance, short service refunds and trivial commutations, and is charged as if the scheme were a UK one. I accept what the Financial Secretary said about protecting the country's tax base, the Exchequer's interests and so on, but what would happen if the Inland Revenue's rules conflicted with the rules of the host country? That is unlikely to be the case with the annual allowance—presumably one would just look at the lower annual allowance in the other country—but the rules on trivial commutation or short service refunds may be substantially different elsewhere. There may be a requirement, for example, to provide a trivial commutation, which in the UK would push the member above the 1 per cent. limit on trivial commutation. How would conflicts between the rules or laws in this country and those in the host country be resolved?
	What reporting requirements will be placed on overseas schemes? Government amendment No. 115 deals with that, but the Government are proposing to introduce a much lighter-touch regime for all pension schemes that will focus on registration rather than approval. There is concern that that is too light a touch for the UK, but there will be an even lighter-touch regime for overseas schemes. Is the Inland Revenue in a position to police the regime? Will it poke its nose into overseas schemes to make sure that they are providing accurate returns? How on earth will it know whether someone has received a trivial commutation or a short service refund? One hopes that operators of the scheme are honest about the requirement and that members are honest about their refunds, but there is no mechanism for the Inland Revenue to police the proposals. It may rely on the Exchequers of overseas Governments or on pensions regulators in other countries, but is the Financial Secretary satisfied that those safeguards will be adequate and that the Treasury will be on top of the situation?
	The Financial Secretary and the Treasury are anxious to prevent the possibility of the new pensions taxation regime from being used as a tax avoidance mechanism. The annual allowance, she explained in Committee, was introduced for precisely that reason, as there was scope for people to come here, set up a scheme, put a lot of money in and then depart. I assume that she is satisfied with the measures that she has introduced to tackle that problem but, as we have not had an opportunity to question her about them, is she content that they will not be open to abuse? How do the proposals relate, if at all, to the EU pensions directive, or, to give it its proper name and get the snappy EU jargon on the record, the directive on the activities of institutions for occupational retirement provision?
	The Opposition welcome attempts to create more of a single market in the financial services industry, and believe that the UK financial services industry is well placed to do extremely well and sell its products to other European countries. There are, however, great concerns about the directive. For example, it could cost UK schemes up to £300 billion—that is an extraordinary figure, but I have checked it, and the industry assures me that it is correct. Christine Farnish, the chief executive of the National Association of Pension Funds says that the directive
	"is very dangerous and very costly to UK schemes, and because the rules cannot be scheme-specific, will no doubt lead to endless battles in the courts. It is ridiculous; it is not in the real world."
	The directive attempts to allow people to build up a pension as they move between member states. Many new clauses added to the Pensions Bill on Report were meant to ensure that we complied with the directive. Do the present proposals belong to the same category, and can the Financial Secretary clarify whether they are an attempt to make sure that we comply with the directive? As I said, on a first glance—the Government tabled them only on Friday—the amendments do not appear to be unreasonable. We do not want people to come and work here and build up pension provision—we want people in this country to be able to go and work abroad and build up their pension provision. We are not against the principle behind the proposals, but I should be grateful if the Financial Secretary would provide us with assurances about their practicality and the reporting requirements on overseas schemes and their policing. How will she deal with conflict, if it arises, between the rules in this country and the rules of host countries? Will she explain to the House why the proposals have been made at the last moment, and why we still do not have many important regulatory details?

Quentin Davies: I shall start with negative strictures and concerns before making some positive points.
	It is unsatisfactory that the Government should introduce legislation at the last minute without consultation. There are only two acceptable excuses for introducing substantive new clauses on Report. First, the Government might have to respond to events that they could not have anticipated. The Paymaster General made that excuse—it sounded reasonable, given the background that she described—when she introduced Government new clauses 9 and 10, and the House accepted it. The second reason is if the Government for once take account of debate, discussion and consideration in Committee and have a genuine rethink in the light of Parliament's reaction to their original proposals. That is how Parliament should work, and how it did work for hundreds of years before 1997. I hope that it will work that way again as soon as possible.
	Unfortunately, however, neither of those excuses is available to the Financial Secretary, but if she proves me wrong I shall be pleasantly surprised. It is unsatisfactory, as my hon. Friend the Member for Tatton (Mr. Osborne) said, that explanatory notes are not available—at least, they were not half an hour before our proceedings began this afternoon, when I went to the Vote Office in the hope of finding them. Of all the epithets that the hon. Lady could reasonably use of her new clauses—I shall use some nice ones in a moment—"simple" is not one of them, as they consist of seven or eight pages of complex measures, including equations and so on. Explanatory notes would have helped our debate, and Parliament has been treated with something less than courtesy. Indeed, insufficient consideration has been given to the importance of our role. I hope that we receive an apology, and that in future the Treasury will try to do a bit better on both those fronts.
	I have a more technical concern that is linked to the points made by my hon. Friend the Member for Tatton about the annual limit and the way in which it will be monitored or enforced. What is the position of people who are in danger of exceeding their lifetime limit because they are highly paid and have substantial pension provisions? Would it not be sensible for them to go abroad to join a qualifying foreign scheme, and then return here? A multinational company will have work forces and pension schemes in different countries—certainly in the European Union and north America—so in principle it should not be too difficult for someone who is transferred to another country to join another scheme. The person could presumably return to the United Kingdom and accumulate any amount up to another lifetime limit and enjoy the benefit in retirement.
	How will the lifetime limit be monitored? Perhaps the answer is that a separate lifetime limit will be applied to contributions to overseas schemes while people are in this country. I am sure the Financial Secretary has thought about that. She did not deal with it in her introductory remarks, but perhaps she will do so.
	Let me make some more positive comments, as I said I would. Despite my earlier remarks, it would be churlish not to praise the Government for having tried to move in the right direction. It is economically important that there should be no undue obstacles to people coming to work in the UK. In theory, the more highly paid they are, the greater the value they will add to our economy while they are here. It is important for high-tech industries, the City and so on that they should come to the UK to work. We all know that pensions can be a major obstacle to labour mobility. The Government are to be praised for trying to remove some of the obstacles.
	The Financial Secretary, to give her her due, clearly set out the purpose of the new schedule. I thoroughly agree with that, but perhaps we could look at the other side. It is true that the British economy will benefit from the removal of obstacles, and individuals coming from abroad and supposedly returning abroad before they take their retirement pension will also benefit. There seems, therefore, to be a basis for reciprocity and for negotiation with countries, especially those in the EU, with which there is a reasonable exchange of labour, particularly highly paid professional labour. We should try to negotiate some reciprocal benefits for UK residents or citizens who go to other countries, especially in the EU, and wish to continue to contribute to a UK scheme on the basis that their contributions will be tax deductible, to allow them to enjoy the mirror-image benefits of those being introduced under the new schedule.
	The Financial Secretary did not say anything about that dimension, but I should be interested to know whether an attempt has been made to generate some reciprocity and whether—this point was rightly made by my hon. Friend the Member for Tatton—the measure contributes to the emergence of a European pensions directive, which would be highly desirable. It is a major obstacle to labour mobility within the EU—a cause to which we all strongly subscribe—that differential pension regimes exist. In some countries, contributions are tax deductible, but in others they are not. In some countries, there are limits to tax deductibility, whereas in other countries there are not. In some countries, pensions in payment are relieved of tax, but in other countries, such as the UK, they are not. The situation is immensely confusing.
	No doubt there are many opportunities for clever arbitrage—building up one's pension in a country where tax deductibility is high, and taking the pension in a country where the tax regime for pensions in payment is the most favourable—but there are also ample opportunities for getting it wrong in both directions. People who are in danger of doing that will not move, so our labour resources are not used as efficiently as they could be if the obstacles were removed.
	It is important to achieve a European directive on pensions. It has been under consideration for an enormously long time. I do not remember when the idea was first mooted, and it is a major failure of the EU's efforts to build up an effective single market that a pensions directive still has not been agreed. I do not want to attribute blame—I would not know how to do so. I have not studied the matter sufficiently in respect of the Council of Ministers, the Commission and so on, but I am happy to allocate blame in general and say that the present position is not good enough and that progress ought to be made.
	My question to the Financial Secretary, which is germane to the new clause, is to what extent the new clause has been considered in that context, as a basis for negotiating bilateral reciprocal arrangements with relevant other countries, and as a contribution to solving the enormous difficulties in finally getting agreement and launching the European pensions directive. If the hon. Lady has made a contribution to that, she will have done a very good day's work indeed for the economy.

Ruth Kelly: There has been an extremely interesting exchange covering all sorts of issues. I can only apologise to the House for the fact that the new clauses were introduced at such a late stage. Clearly, it would have been desirable to introduce them in Committee. The new rules for migrant member relief are based on proposals that were set out in the December 2003 consultation paper, so they should not come as a complete surprise to hon. Members.
	It was clear that the main rules for the new simplified regime were of most concern to employers, scheme providers and scheme members in the UK, but the migrant member rules are important to admittedly smaller numbers of people, and we wanted to introduce them during the current year, albeit at a late stage, to make sure that the people affected by the rules would have certainty in the run-up to the introduction of the measures in 2006.
	I believe that the explanatory notes are available on the Treasury and Inland Revenue websites, and they were placed in the Library in the standard way. I have not checked personally, but I am assured that that happened. I apologise if there was any difficulty in getting access to them.
	The draft regulations will be published over the summer and, as with the other pensions regulations, interested parties will be able to comment on them at that stage. Again, it is unfortunate that it was not possible to finalise the draft regulations in time for the debate, but the industry and others affected by the proposals will have ample opportunity to contribute to their formulation in due course. I am happy to summarise what the regulations made under the two new overseas schedules will do.
	There will be four aspects to the overseas pensions regulations. First, the regulations will set out the detail of the conditions that must be met for an overseas scheme to be a scheme in respect of which an individual may claim migrant member relief, or a scheme to which funds from a UK-registered scheme may be transferred. Secondly, the regulations will set out the information reporting requirements that an overseas scheme must comply with in order for its members to be eligible for migrant member relief, or in order to receive funds transferred from a UK-registered scheme.
	Thirdly, the regulations will set out the way in which the tax rules for registered schemes will be modified for application to overseas schemes. Finally, the regulations will provide detailed rules for identifying which part of the funds in an overseas scheme has benefited from UK tax relief. That is important for identifying, for example, which part of an overseas fund an authorised payments charge may apply to. Some of the questions raised by the hon. Member for Tatton (Mr. Osborne) touched on issues that will be covered in the draft regulations.

George Osborne: Will there be a restriction on the countries in which an overseas scheme could be registered?

Ruth Kelly: As I understand it, the regulations will cover all overseas schemes. To get it absolutely right for the record, I will write to the hon. Gentleman specifying the countries to which they apply.
	On the hon. Gentleman's point about whether the provisions could be used by UK nationals, there would be no bar to UK nationals claiming migrant member relief, provided they met the relevant conditions in the way set out in the Bill—for example, that they were not resident in the UK and were a member of an overseas scheme and eligible for tax relief in their country of residence immediately before coming to the UK. UK nationals can benefit in exactly the same way as with other schemes.
	The hon. Members for Tatton and for Grantham and Stamford (Mr. Davies) were interested in how we could enforce the tax charge in overseas schemes. I understand that that is an area of particular concern, and I have considered it in some detail. There are two ways in which that might be done, depending on how individuals benefit from migrant relief.
	First, a UK-registered scheme might be transferred into an overseas scheme, which is by far the simplest case. In that case, a migrant worker comes to the UK, benefits from UK tax relief, transfers money from a UK-registered scheme into a scheme in a different country and, after benefiting from that tax relief, returns home. A UK-registered scheme will be able to transfer a member's fund to an overseas scheme under the new regime. The overseas scheme must be regulated as a pension fund in its country of establishment and undertake to comply with information reporting requirements regarding payments made to the member.
	Such a transfer would, in itself, count as a benefit crystallisation event, which is a concept that we debated at length in Committee. Any funds transferred in excess of the lifetime allowance will be subject to the lifetime allowance charge at the time of transfer. The UK scheme will, of course, know whether the funds exceed the member's available lifetime allowance, and, along with the member, it will be jointly liable for any lifetime allowance charge. The situation on transfers is straightforward: any excess relief granted over and above the lifetime allowance will be recouped at the point of transfer, so there is no need to worry about collecting a lifetime charge decades after the individual has left the UK.
	Secondly, the situation is more complex when funds in an overseas scheme receive migrant member relief, because there is no transfer between schemes at which a benefit-crystallisation event occurs. Again, such an overseas scheme must be regulated as a pension scheme in its country of establishment and undertake to tell the Revenue about any benefit crystallisation event involving the member. The individual will tell the scheme that they are claiming migrant member relief, so the scheme will know the cases in which it must tell the Revenue about benefit crystallisation events. Any contributions that enjoy migrant member relief, including employer contributions, will count towards the individual's annual allowance. The individual will then need to claim migrant member relief and self-assess any contributions in excess of the annual allowance.
	The lifetime allowance will also apply to amounts within the member's fund that enjoyed migrant member relief. Those amounts, which are calculated by reference to total pension inputs, are tested against the lifetime allowance on the same benefit-crystallisation events that apply to UK-registered schemes. The individual, however, will be solely liable for any lifetime allowance charge due.

George Osborne: rose—

Ruth Kelly: I intend to elaborate further on how the scheme will operate. If the hon. Gentleman waits for a few moments, I may answer his point.
	If an individual comes to the UK, contributes fairly large amounts each year to a UK pension scheme underneath the annual allowance limit and returns to their country of origin, they cease to benefit from UK tax relief, and a benefit crystallisation event will occur some years down the line at the point of retirement. In that case, no annual allowance charge will be imposed, but, depending on the lifetime allowance at the point at which that individual retires, a lifetime allowance charge may be due. The overseas scheme should tell the Revenue about such a benefit crystallisation event, and if it fails to do so it will cease to qualify for migrant member relief. The Revenue will know that a benefit crystallisation event occurred and the total in the fund, so it will be able to risk-assess the situation and concentrate its efforts on larger cases.
	The scheme, the Revenue and the individual will have various records of the pension contributions made to the scheme, and the Revenue will be able to call on further information from the member and the scheme. That provision will deal with the problem in normal situations, and I emphasise that it will cover only those who accumulate large sums above the lifetime allowance.
	Where a member is resident in a treaty partner country, EU directives such as the mutual assistance directive, the exchange of information provisions or the double taxation agreements will apply, but in the vast majority of cases individuals claiming migrant member relief will get nowhere near the lifetime allowance. The annual allowance limit is designed to slow the rate at which the individual accumulates UK tax-relieved funds. Migrant workers tend to come to the UK for short periods, so it will take them a long time to accumulate a fund in excess of the lifetime allowance.

Quentin Davies: I recognise that this point will apply only in a minority of cases, but the Financial Secretary's second approach to monitoring potential breaches of the lifetime limit is premised on the overseas pension scheme arranging its accounts so that it knows not only what proportion of the total fund is due to an individual, but what proportion of that personal element in the fund derives from contributions made during that individual's employment in this country. In the case of a defined contribution British pension scheme, it is not possible to allocate a percentage of the fund to an individual. The only way in which the Financial Secretary can achieve her purpose is to wait until the pension is in payment, and then apply her multiple of 20. Unfortunately, she will not know how much of the total pension in payment derives from contributions made during employment in this country, and how much of it derives from or relates to provisions made in respect of that individual's employment overseas.

Ruth Kelly: Not only the scheme but the individual may hold useful information to deal with that point. The Inland Revenue also holds records, which it obtains in various different ways in the UK, and it can base its risk assessment on them.

Quentin Davies: The Financial Secretary is unduly optimistic, because the Inland Revenue will have access only to contribution records for the period of residence in this country, and it will not know information such as the capital gain and the interest gain accumulated over the 20 or 30 years before the pension is paid. It will not be able accurately to assess the capital gain and interest that accumulates on contributions made throughout the rest of the individual's career, when they are not resident in this country.

Ruth Kelly: The hon. Gentleman is right, which is why in the case of overseas schemes we will calculate the total pension input contributions, rather than the total size of the pot, when testing the lifetime allowance charge. That is the practical response to some of the issues that he raised.
	The hon. Gentleman is also interested in EU fundamental freedoms, which dictate that migrant member relief must give relief on the same terms and to the same extent as relief is given for contributions to UK schemes, and he understands why that is the case. We must apply the lifetime allowance at the same time at which it would apply to a registered scheme.

George Osborne: Before the Financial Secretary turns to the European aspects of the matter, there are a couple of other practicalities. What happens if an overseas scheme transfers to another overseas scheme that transfers to another overseas scheme? Is it possible that the Inland Revenue would lose track of such a pension fund? I know that the Financial Secretary will write to me on the countries in which schemes may be set up, but if a scheme were set up in the Cayman islands and a person became resident there for a couple of weeks, could the Inland Revenue lose track of the situation? In which currency will the calculation be made—presumably the answer is sterling—and when will the exchange rate be calculated?

Ruth Kelly: The rules for collecting debts that leave the country with a foreign national will apply in the usual way. The mutual assistance and recovery of debt directive applies in EU countries, and the information provisions apply in respect of other territories—the hon. Gentleman mentioned the Cayman islands in particular.
	The lifetime allowance charge is not a perfect science, and difficult cases involving practical difficulties in recovering debts will occur—difficult cases may occur whenever individuals leave the UK with debts that remain payable. However, the vast majority of people who come to work in the UK—for example, an American national working in the City of London—are here for a relatively short period, and will not be able to accumulate sufficient sums to make them liable for the lifetime allowance charge. For the vast majority of individuals, there is no problem whatsoever; and there are ways of recovering the charges due for a very small number of individuals with extremely large pension pots. However, for the reasons of fundamental freedoms that the hon. Member for Grantham and Stamford espoused, but also to be fair and to retain the competitiveness of the City of London and to maintain Britain's attractiveness as a place to work and do business, we think that this is a reasonable provision.

Quentin Davies: Before the hon. Lady draws her remarks to a close, will she address the issue of the European pensions directive?

Ruth Kelly: I am not yet drawing to a conclusion, as I still have some points to deal with.
	The hon. Member for Tatton asked what would happen if the foreign scheme rules did not match UK rules. I assure him that the regulations will amend the UK rules so that they apply to overseas schemes in a way that broadly corresponds to UK rules. That avoids problems relating to slight differences in rules. Generous UK relief is given on these contributions, and it is right that those who benefit by them should comply with UK rules. The requirements that overseas schemes will have to fulfil are set out in clause 140, which we discussed at length in Committee. The draft regulations that will be published in the summer will be revised to make a small distinction between schemes to which migrant member relief will apply and schemes to which transfers may be made; apart from that, they will be as published in clause 140.
	I have already touched on some of the reporting requirements with which an overseas scheme will have to comply in order for its members to be eligible to claim migrant member relief or to receive transfers from UK-registered schemes. For example, a report will be required when an overseas scheme makes an unauthorised payment to an individual who has had migrant member relief.
	The UK has a system of double taxation agreements, many of which provide reciprocity for pension contributions. We want to encourage that, because it provides a valuable means of assistance to people who work in different countries and encourages labour mobility.
	The EU directive that was mentioned during the debate deals with how pensions schemes are regulated, but not with their tax treatment. We are firmly of the opinion in the UK that it is up to each country to determine how their pension funds are treated for tax purposes, because that is fundamental to national sovereignty. I am sure that Conservative Members would concur with that.
	Following that extensive explanation, I hope that Conservative Members will agree that this is a valuable provision that will continue to make Britain and the United Kingdom a very attractive place in which to work. I apologise for the fact that the new clauses have been introduced late in the day, but rather than defer them to the next Finance Bill I thought it wise to give the small number of people who will benefit from the provisions the additional certainty of an extra year; and of course they will have time to comment on the draft regulations as and when they are published.
	Question put and agreed to.
	Clause read a Second time, and added to the Bill.

New Clause 13
	 — 
	Non-UK schemes: application of certain charges

'Schedule (Non-UK schemes: application of certain charges) contains provision applying certain charges under this Part in relation to non-UK schemes.'.—[Ruth Kelly.]
	Brought up, read the First and Second time, and added to the Bill.

New Clause 14
	 — 
	Appeal against decision to exclude recognised overseas pension scheme

'(1)   This section applies where a recognised overseas pension scheme is excluded from being a qualifying recognised overseas pension scheme by a decision of the Inland Revenue under section 166(5).
	(2)   The scheme manager may appeal against the decision.
	(3)   The appeal is to the General Commissioners, except that the scheme manager may elect (in accordance with section 46(1) of TMA 1970) to bring the appeal before the Special Commissioners instead of the General Commissioners.
	(4)   Paragraphs 1, 2, 8 and 9 of Schedule 3 to TMA 1970 (rules for assigning proceedings to General Commissioners) have effect to identify the General Commissioners before whom an appeal under this section is to be brought, but subject to modifications specified in an order made by the Board of Inland Revenue.
	(5)   An appeal under this section against a decision must be brought within the period of 30 days beginning with the day on which the notification of the decision was given.
	(6)   The Commissioners before whom an appeal under this section is brought must consider whether the recognised overseas pension scheme ought to have been excluded from being a qualifying recognised overseas pension scheme.
	(7)   If they decide that the recognised overseas pension scheme ought to have been excluded from being a qualifying recognised overseas pension scheme, they must dismiss the appeal.
	(8)   If they decide that the recognised overseas pension scheme ought not to have been excluded from being a qualifying recognised overseas pension scheme, the recognised overseas pension scheme is to be treated as having remained a qualifying recognised overseas pension scheme (but subject to any further appeal or any determination on, or in consequence of, a case stated).'.—[Ruth Kelly.]
	Brought up, read the First and Second time, and added to the Bill.

New Clause 15
	 — 
	Leases

'(1)   Part 4 of the Finance Act 2003 (c. 14) (stamp duty land tax) is amended as follows.
	(2)   In subsection (3) of section 43 (land transactions), in paragraph (d) (inserted by paragraph 2(b) of Schedule 37 to this Act), after "where" insert "(i)" and at the end insert ", or
	(ii)   paragraph 15A of Schedule 17A (reduction of rent or term) applies.".
	(3)   In section 48 (chargeable interests), at the end of subsection (7) (inserted by paragraph 4(2) of that Schedule) insert "and to paragraph 15A of Schedule 17A (reduction of rent or term of lease)".
	(4)   In section 53 (deemed market value where transaction involves connected company), for subsection (1) substitute—
	"(1)   This section applies where the purchaser is a company and—
	(a)   the vendor is connected with the purchaser, or
	(b)   some or all of the consideration for the transaction consists of the issue or transfer of shares in a company with which the vendor is connected.
	(1A)   The chargeable consideration for the transaction shall be taken to be not less than—
	(a)   the market value of the subject-matter of the transaction as at the effective date of the transaction, and
	(b)   if the acquisition is the grant of a lease at a rent, that rent.".
	(5)   In section 79 (registration of land transactions etc), in subsection (2) (transactions to which section does not apply) (as amended by paragraph 7 of Schedule 37 to this Act)—
	(a)   in paragraph (a) for the words from "by virtue of" to the end substitute "by virtue of—
	(iii)   section 45 (contract and conveyance: effect of transfer of rights), or
	(iv)   paragraph 12B of Schedule 17A (assignment of agreement for lease),";
	(b)   at the end insert—
	"(c)   under paragraph 12A(2) or 19(3) of Schedule 17A (agreement for lease), or
	(d)   under paragraph 13 (increase of rent) or 15A (reduction of rent or term) of that Schedule.".
	(6)   After that subsection insert—
	"(2A)   Subsection (1), so far as relating to the entry of a notice under section 34 of the Land Registration Act 2002 or section 38 of the Land Registration Act (Northern Ireland) 1970 (notice in respect of interest affecting registered land), does not apply where the land transaction in question is the variation of a lease.".
	(7)   In subsection (3) of that section, after "The certificate" insert "referred to in subsection (1)".
	(8)   In Schedule 4 (chargeable consideration), in paragraph 10 (carrying out of works), in sub-paragraph (2A) (inserted by paragraph 9(2) of Schedule 37 to this Act), for the words from the beginning to "completion)," substitute—
	  "Where by virtue of—
	(a)   subsection (8) of section 44 (contract and conveyance),
	(b)   paragraph 12A of Schedule 17A (agreement for lease), or
	(c)   paragraph 19(3) to (6) of Schedule 17A (missives of let etc in Scotland),
	there are two notifiable transactions (the first being the contract or agreement and the second being the transaction effected on completion or, as the case may be, the grant or execution of the lease),".
	(9)   Subsections (2) to (4) and (8) apply in relation to any transaction of which the effective date is on or after the day on which this Act is passed.
	(10)   Subsections (5) to (7) apply in relation to any transaction or deemed transaction of which the effective date is on or after 17th March 2004.
	(11)   In this section "effective date" has the same meaning as in Part 4 of the Finance Act 2003.'.—[Ruth Kelly.]
	Brought up, and read the First time.

Ruth Kelly: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following: Government new clause 16—Chargeable consideration.
	Government amendments Nos. 160 to 165.
	Amendment No. 12, in page 562, line 25 [Schedule 37], at end insert—
	'Application of paragraph 14
	15A   (1)   Paragraph 14 does not apply to a lease if the following two conditions are met.
	(2)   The first condition is that—
	(a)   no chargeable consideration other than rent has been given by the Purchaser in respect of the grant of the lease; and
	(b)   no arrangements are in place at the time of the grant of the lease for any chargeable consideration other than rent to be given by the Purchaser in respect of the grant of the lease.
	(3)   The second condition is that the rent payable under the lease as granted was a market rent at the time of grant disregarding any provisions in the lease that operate to increase the rent payable after the fifth year of the term of the lease to an amount that exceeds the market rent at the review date.
	(4)   The market rent of a lease at any time is the rent that the lease might reasonably be expected to fetch at that time in the open market.
	(5)   The review date is a date from which the rent determined as a result of a rent review is payable.'.
	Government amendments Nos. 150 to 159.
	Government amendments Nos. 166 to 221.

Ruth Kelly: New clause 15 is the first in a series of Government amendments to the legislation governing stamp duty land tax. Some of the amendments arise from the need to counter known avoidance opportunities, but most are in response to representations made to us since the publication of the Bill.

Mark Prisk: Do I take it that the Financial Secretary is suggesting that these avoidance schemes were known prior to the publication of the Bill? If that is the case, why were they not included in the original text?

Ruth Kelly: As the hon. Gentleman is well aware, it takes some time to draft legislation. These avoidance opportunities have only recently been made known to us. As I say, most of the amendments are in direct response to representations made to us. Most are relieving measures that I hope the hon. Gentleman will welcome.
	I shall deal first with the new clauses, then with the Government amendments in the order of the relevant provisions in the Bill. Finally, I shall deal with Opposition amendment No. 12. As full explanatory notes have been published, I propose to discuss only the more significant provisions.
	New clause 15 deals with a number of matters concerning leases. The only change of substance is subsection (4), which concerns leases where the tenant is a company connected with the landlord. Section 53 of the Finance Act 2003 provides that the consideration for such transactions is deemed to be market value rather than the consideration actually given. However, many leases will have only a negligible market value, but there will still be a rent payable. Subsection (4) ensures that the rent is taken into account. That is similar to other "market value" provisions such as those governing exchanges.
	New clause 16 concerns the termination of chargeable consideration in two sorts of transaction: first, the transfer of property subject to existing debt; and secondly, the variation of the testamentary disposition, which is not wholly exempt from charge. The more substantive issue concerns transfers subject to a debt.
	Our intention in the 2003 Act was that transfers subject to a debt should be treated in the same way under stamp duty land tax as they were under stamp duty. However, inquiries from customers have suggested that the current provisions could benefit from clarification. No change of practice is intended. The examples in the explanatory notes show how the charge will work—the same way in which it worked under stamp duty.
	I turn to the Government amendments, of which I shall mention only the most significant. Amendments Nos. 155 to 159 concern relief for charities and amend clause 294. They make it possible for charities to claim partial relief from stamp duty land tax. That issue was raised in Committee of the whole House by the hon. Member for Yeovil (Mr. Laws), and I undertook to consider it. If a charity makes an acquisition but does not intend to hold the entirety of the acquisition for qualifying charitable purposes, the charity will now be eligible for partial relief provided that it intends to hold the majority of the acquisition for qualifying charitable purposes. In such cases, a clawback of a relevant portion of the relief will occur when the charity disposes of that part of the acquisition. This will ensure that the relief granted is in proportion to the share of the acquisition held by the charity in furtherance of its charitable aims.
	I turn now to some of the amendments to schedule 37 of the Bill. Amendment No. 161, introduced in response to representations, extends the circumstances in which overlap relief is available when one lease comes to an end and a new one is granted. Amendments Nos. 162 and 163 extend the circumstances in which the assignment of a lease is treated as the grant of a new lease to the case where the original grant was to a nominee or bare trustee for the lessor. Amendment No. 165 provides for a charge to stamp duty land tax when the lease is varied so as to reduce the rent or the term.
	I turn now to the amendments to the partnership provisions in schedule 39. These amendments fulfil commitments that I made in the Committee of the whole House, in which we had an extensive debate on this point. Eighteen of them are required to restrict the charge to land in the United Kingdom. They change the phrase "interest in land", or something similar, to "chargeable interest", or something similar. This is in response to the concerns raised by the hon. Member for Hertford and Stortford (Mr. Prisk) in Committee, and I hope that he will be satisfied with our conclusions.
	Amendments Nos. 175 to 182 inclusive amend the charge on transfer of land into a partnership by a partner, an incoming partner, or someone connected with such a person. Our intention is to deal with those situations in which joint owners outside a partnership transfer land into a partnership in which they, or persons connected with them, are partners. An example is when a husband and wife start up a business in partnership, and the business is run from their jointly owned property. The calculation now identifies the smallest proportion of the land transferred that remains owned by a person who both owns the land outside the partnership and is a partner. For example, when parents gift land to a partnership in which the partners are their children, there would be no charge as the children would be connected to their parents. Their ownership outside the partnership would therefore be treated as 100 per cent. There might be occasions on which land is transferred by way of sale rather than by gift. In such cases, any payment will be charged. The charge on the payment is restricted to reflect the proportion of the land that is exempt from the market value charge.
	Amendments Nos. 192 to 201 inclusive make a similar restriction to the market value charge on the transfer of land out of a partnership to a partner, former partner, or someone connected with such a person. They also introduce a proportional charge on any payment made to the partnership. As part of this process, amendment No. 200 introduces a further restriction on the charge when land is transferred between partnerships that have at least one partnership in common, or the partnerships are connected through connected persons. There would normally be two charges as one partnership is transferring land to a partner or connected person, and the other partnership is having land transferred to it by a partner or connected person. The amendments restrict those two charges to the single highest charge. However, partnerships of bodies corporate cannot benefit from this treatment unless the connection between the transferor and the transferee is less than 75 per cent. Our intention is that when the connection is 75 per cent. or more, the transferee should claim group relief, as with other transfers between companies in the same group.
	Amendment No. 219 provides that partners in a partnership are not to be treated as connected persons solely because of their being partners. Without this amendment, each partner in a partnership would be treated as owning 100 per cent. of the land in the partnership, and the charge on transferring land into and from a partnership would not be effective.
	Amendments Nos. 185 to 188 align the requirements of a lease to be treated as a market rent lease more closely with commercial leases, in response to representations made after the publication of the Finance Bill. Market rent leases do not count as partnership property for the purpose of determining market value of land interests. Leases for less than five years only have to be granted at an initial market rent. Longer leases have to have rent reviews to market rent at least once every five years. In either case, there must be no chargeable consideration other than rent.
	Amendments Nos. 202 and 203 address concerns that disadvantaged area relief might not apply to transfers of an interest in a partnership. They also ensure that groups and charities reliefs are available for these transactions. Amendments Nos. 201 and 215 introduce changes to the charge to stamp duty on transfer of an interest in a partnership, in response to concerns expressed by the hon. Member for Hertford and Stortford in Committee. These amendments have the effect of restricting the stamp duty to that which would be payable on the net value of any shares and securities held by the partnership when an interest in a partnership is transferred. Again, this accords with the principles of transparency.
	Opposition amendment No. 12 returns to the subject of abnormal rent increases, which we discussed in Committee. At that stage, the hon. Member for Hertford and Stortford sought to remove the provisions in their entirety. In contrast, this amendment would limit their application, but it would do so in a way that would in practice prevent them from ever applying. Although we discussed the need for paragraphs 14 and 15 of schedule 37 at length in Committee, I shall briefly remind the House why the provisions on abnormal rent increases are needed. They are part of the scheme for charging stamp duty land tax on leases with variable rents. The general rule is that changes in rent after the end of year five are ignored. However, an abnormal rent increase—that is, one exceeding an annualised increase of RPI plus 5 per cent.—is treated as the grant of a new lease in consideration of the increased rent.
	The rule for leases is intended to minimise the need for additional returns, and means that, in almost all cases, no returns will have to be made after the end of the five-year period. It will also make it difficult for tax avoiders to reduce their liability to tax by arranging for large increases in rent in the future by setting an artificially low rent in the first five years. The amendment would render those provisions ineffective. The result would be that, as long as the parties could arrange for the initial rent to be a market rent, there would be no liability to pay any more stamp duty land tax, regardless of the level of future rent increases. I suggest to the hon. Gentleman that it is easy enough for parties to arrange for a very low rent to be a market rent, by including, for example, onerous covenants in the lease. Subsequently, the lease could be varied for no consideration, so as to remove those covenants. Therefore, the market rent would rise.
	In addition, the amendment would impose a heavy compliance burden on taxpayers, who, to bring themselves within its scope, would need to demonstrate at the outset that the rent was a market rent. That might involve paying for valuation advice, and paying advisers to negotiate with the Revenue. By contrast, the current provisions ensure that the initial compliance burden is minimal. Only when, if ever, the rent increases after the end of year five do the provisions need to be considered. The Government believe that the rules in paragraph 14, which provide for further returns only if rent increases are more than 5 per cent. per year plus RPI, will exclude ordinary business rents without the need for the proposed paragraph. As I said in Committee, the provision will not impose any charge until December 2008. Between now and then, I assure the hon. Gentleman that we will keep the provision under review, to make sure that it meets its purpose.

Mark Prisk: I shall no doubt come back to the broader points, but can the Financial Secretary explain, given the rigidity of a rule of RPI plus 5 per cent. or an increase of 5 per cent., what will happen in an area that is seeking to regenerate, where local market rent is at a certain level, and two or three years later, after successful regeneration, it is a much better area and the increase has been 15 or 20 per cent? Will additional tax have to be paid for that benefit?

Ruth Kelly: As I am sure the hon. Gentleman knows, we have debated that point in a Committee of the whole House. I argued to him that that situation was most unlikely to occur. I assure him, however, that we will keep the proposal under review before it is introduced in 2008, to make sure that it is appropriate at the time.
	The proposals that we have put forward carry a minimal compliance burden. They are designed to try to make sure that as few leases as possible are covered. I commend the new clauses and amendments to the House.

Mark Prisk: I thank the Financial Secretary for her opening remarks. First, I want to refer to amendment No. 12, before considering the Government's new clauses and 71 amendments to this part of the Bill.
	The purpose of amendment No. 12 is to reduce the compliance costs for businesses of stamp duty land tax. It would do so by disapplying paragraph 14 of schedule 37 when a lease has been granted at a market rent from the outset. As such, many people feel that amendment No. 12 directly fulfils the Government's original aims for stamp duty land tax: to modernise stamp duty, without unduly creating a bureaucratic burden on business.
	I wish that I could say the same about the Government's attempts to legislate for this tax. After a botched consultation, the legislation has proved ill considered and ill prepared, and there is a raft of areas in which it has significantly increased the regulatory burden for business. Where there was once a one-page tax form we now have 12 pages, plus more than 40 pages of explanatory notes—and that is even before the Bill becomes law.
	The provisions concerning abnormal rents exemplify the problem. Believing that tenants and landlords are, as we speak, actively colluding to create tenancies with below-market initial rents, the Government have brought forward a ridiculous six-step, three-formula test. Tenants would be required to carry out this test at every rent review after five years. Of course, the premise that most landlords will give up a full rent now in the hope of higher rents at some point in the near or distant future is completely false. I fully accept that some peculiar and unusual agreements may arise, but given that in the vast majority of cases such an arrangement would clearly be against the interests of the landlord, they will be extremely rare.
	The Financial Secretary has argued in the past, and again this afternoon, that having undertaken the six-step test few businesses are likely to find themselves liable. That may well be true, but they will still have to undertake the test to find out, which means that the burden of compliance affects most businesses. The purpose of amendment No. 12 is to relieve most businesses of the bureaucratic burden by disapplying the test when the lease is granted at a market rent. I am grateful to the British Property Federation for helping to identify the change.
	As the Financial Secretary suggested, if I had my way it would be lovely to see the back of this nonsense. Sadly, however, we are not in that position, so we must try to amend the Bill in the current climate.
	The amendment draws partly on paragraph 13 of schedule 39, which excludes leases granted at a market rent from being partnership properties for the purpose of this tax. To that extent, it is based on a principle initiated by the Government. It may not have been drafted perfectly, but I hope the Financial Secretary will acknowledge that it is a positive proposal, and will monitor it and act accordingly. She nods; I will hold her to that.
	New clauses 15 and 16 change the provisions for agreements to lease, for granting and varying leases, and for the exemption of certain forms of chargeable consideration. The Financial Secretary tells us that the new clauses matter, and they may well matter; but why did they not matter in April, when the Bill was published, in December, when the regulations were debated, or at the time of last year's Finance Bill, when the Government first promoted this tax—or even during the consultation before the Bill, which the Government abruptly curtailed? Why are there suddenly 73 amendments and new clauses relating to a tax that is less than a year old? Last year the Chief Secretary waxed lyrical in his usual style, telling us that the tax would work perfectly well. Yet here we are, less than 12 months later, rewriting the rules before the ink has dried.
	I also want to comment on the way in which the changes have been presented. Here I strike a note of disappointment as much as anything else. Why did the Government table all 73 amendments and new clauses on Friday afternoon, when the House was not sitting? What possible opportunity did that give Members, or those whom they represent, to consider the effects of the changes? I draw no comfort from this, but I think that the way in which the legislation has been presented suggests either incompetence or a wanton disregard for the House. I hope that the Minister will be able to explain. I hope that she will also be able to explain what led to the change of heart on the carrying out of works. Who will benefit from the change in new clause 15, and who will not?
	What independent evidence can the Financial Secretary offer us to show that the granting of leases constitutes a significant tax avoidance scheme, as is alleged? What change in tax yield does she expect? Can she tell us whether it will rise or fall?
	What assessment of the compliance costs has the Inland Revenue undertaken? This is, after all, the fourth version of the tax in 12 months. Can tenants expect renewed guidance, and if so, in what form and when?
	New subsection (1A) in new clause 15(4) refers to market value. I assume that that is open market value. If so, can the Financial Secretary tell us on what basis the valuation is undertaken? Does new subsection (1A)(b) widen the scope of the term "chargeable consideration", or does it merely confirm its existing application?
	On a wider point, does not the Minister recognise that the ability of landlords and tenants to vary leases to reflect changing commercial and trading circumstances is a vital part of a dynamic and successful economy? Does she not therefore accept that heavy-handed tax rules could hamper an open, flexible rental market in commercial property and thus create a drag on our competitiveness? To that end, I hope that she will be able to tell us what discussions she has had with ministerial colleagues in the Department of Trade and Industry and in the Office of the Deputy Prime Minister on Government policy to improve flexibility in leases. That is an established Government policy. Can she tell us when she has met them and what discussions she has had with them?
	On subsection (3) of new clause 16, can the Minister describe the circumstances in which the change of rules applies? How will the changes in the rules concerning property with secured debt affect mortgaged property—residential or commercial? Can she clarify whether the new clause allows for properties with a second, or further charge? I appreciate that she may not be able to provide us with an immediate answer. I am sure that hon. Members on both sides of the House would, if it is appropriate for the Minister, be willing to receive a written answer.
	I am also concerned about subsection (7) of new clause 16, which states:
	"The other amendments made by this section are deemed always to have had effect."
	Is that not a retrospective measure? If so, why is it being introduced in this way to this Bill?
	I turn to some of the 71 amendments. I welcome the amendment to clause 294, which will allow charities, as the Minister suggested, to claim partial relief from stamp duty land tax on certain acquisitions. The Minister will know that we on the Conservative Benches retain concerns about the scope of the definition "qualifying charitable purposes" but, in the absence of a rethink on that particular point, it is only fair to say that the measure is helpful and I welcome it.
	I also welcome several of the changes to schedule 37. I understand that they reflect some of the points that were raised not simply by those outside the House but by many members of the Standing Committee last year. It would have been nice to have resolved them last year but, again, I recognise that the Government are now acting to correct their past errors—it would be remiss of me not to recognise that. However, the Government are treating a variation as an acquisition of a chargeable interest. How, in law, does the Minister distinguish between a rent review and a variation of rent?
	In amendment No. 161, there is a reference to
	"the same or substantially the same premises".
	Can the Minister clearly tell us what "substantially the same" means? There is uncertainty there.
	The reference in other amendments to market value concerns me. The Minister and I have discussed market rents and discounted cash-flow valuation. Is this a discounted cash-flow valuation, or is it what someone will pay? It is an important distinction.
	The Minister needs to realise that there may well be times when people will pay more than the market value because of other circumstances related to their business, or perhaps for a personal reason. That cannot be reflected in a DCF valuation, yet it is what the market is willing to pay. In those circumstances, if someone pays more than the DCF valuation of "market value", what happens to the difference in tax terms? How is it treated?
	The changes to schedule 39 are quite extensive and they seek to legislate for almost every eventuality concerning partnerships. It would be remiss of me not to recognise that some matters that were discussed in the Standing Committee and raised by me and others have been responded to. I welcome that. However, I think that, given that we are given five-step and three-step formulae in addition to the existing six-step test on abnormal rents, there is still confusion and crudity in the legislation. Indeed, if a partnership of five or more people were to try to transfer an office to a similar partnership under this legislation, more than 25 pages of primary tax law would be involved on that narrow point alone. Given the Financial Secretary's original aim of a simpler and more modern tax, how on earth can she possibly justify this provision?
	Although some of these amendments do indeed deserve our support, the truth is that their number and late introduction is a very accurate example of how poorly this Government sometimes behave towards this House. Where we get promises of simplicity, we end up with bureaucracy; where we are offered fairness, we end up with iniquity; and where we are promised certainty, we simply have ceaseless change. By way of contrast, our amendment has the potential to help thousands of businesses. I fully accept that it is not perfect, but it does merit serious consideration. For those reasons, I ask the Financial Secretary to reconsider her earlier remarks. Or will she now reject this amendment and, as I suspect she will, come back to the House in a year's time—be it on Report, in Committee or even at the beginning of next year's Finance Bill—and introduce something very similar in the end? I hope not. Rather, I hope that she will for once think beyond her briefing and listen, and thereby show that debates in this House can just occasionally be reflected in the actions of this Government.

Ruth Kelly: We have had yet another full contribution to the debate from the hon. Member for Hertford and Stortford (Mr. Prisk), who takes a personal interest in these issues, given his previous experience in the field. Yet again, his contribution has ranged from questioning the concepts behind particular clauses to questioning the detailed drafting of individual amendments. However, he will agree that I covered some of the issues raised in my opening statement, and I shall now attempt to deal with the more general points. If specific drafting issues and matters of legal terminology remain unanswered, I promise that I shall write to him and fill him in on some of the detail.
	I want to begin by welcoming the hon. Gentleman's welcome for some of the measures that we have implemented, such as granting greater relief to charities. That measure was called for by the hon. Member for Yeovil (Mr. Laws) and we have been able to respond, so he, too, will welcome it. I should also apologise to the House for the fact that it was not possible to make these amendments earlier. This is an entirely new tax, as the hon. Member for Hertford and Stortford knows, and it is impossible to know how such a tax will work in every particular before introducing it. Issues will always arise as the operational impact of a new tax becomes clear, and representations will always be made to the Government as it comes into effect. I should tell the House that some of those representations were made extremely late in the day—after the Finance Bill had been published and considered in Committee—so it was not possible to introduce these amendments sooner.
	The hon. Member for Hertford and Stortford will accept that 18 of the 73 amendments are needed purely to restrict the charge to land in the UK—an issue that we discussed in Committee. Parliamentary counsel suggested that this was the appropriate way to bring that provision into operation.

Mark Prisk: The Financial Secretary is right to say that those 18 amendments were necessary, but I come back to the fundamental point over which we argued last year, and which I still regard as an important principle of tax legislation. It was clear last year, and it is clear from the Bill and the 71 amendments and two new clauses that, in keeping with the considered view of all outside tax and property experts, this was a Bill in a hurry. As a result, more mistakes were made than were necessary, and the compliance costs were greater. Does the Financial Secretary not accept that, as we and a long list of outside organisations, including the Chartered Institute of Taxation, have argued—they are more expert on these matters than I am—it would have been far better to get things right the first time, rather than adopting this "make do and mend" approach? That is our central concern, and I hope the Financial Secretary will respond to it positively.

Ruth Kelly: The hon. Gentleman will know that, in an ideal world, we would get legislation absolutely correct first time. I am afraid that that is impossible when we bring in a completely new tax.
	Most of the amendments that we are discussing today are deregulatory in impact and have come about because of a greater understanding of operational impacts; for example, how stamp duty operates in Scotland compared with England and so forth. Issues have been raised with the Inland Revenue and the Treasury; some of them very late in the day, and after the usual consultation period had finished in some cases.
	In order to achieve the objectives and published aims of stamp duty land tax, it has been necessary on occasion to table a substantial number of amendments. Of course we endeavour to avoid late amendments wherever possible and, as I said, most of the amendments we are discussing today are deregulatory in impact.
	The hon. Gentleman asked about the effect on yield. There is not a substantial effect on yield, either upwards or downwards, from the measures that we are discussing today, very many of which are highly technical. However, some—such as the hon. Gentleman's new clause—have a more significant impact in terms of how the market operates in practice.
	Amendment No. 12 is the main point of interest to the hon. Gentleman, who suggests that somehow lower rents now as an artificial means of avoiding lease duty will not be used widely because the landlord does not have the incentive. However, the professional press has recognised that a low rent payable for the first five years of a lease is a method to be considered for reducing stamp duty land tax. I cannot accept that an abnormal rent provision is unnecessary. However, I will look at his proposal in a positive spirit. We are always keen to reduce compliance burdens. In fact, I argued earlier that his proposal would increase the compliance burden compared with what we have put forward. We had an extensive debate on the compliance burden in the Committee of the whole House.

Mark Prisk: I am unclear as to why an additional independent valuation would be required, given that in any negotiation between a landlord and tenant there would be an independent valuation for the two parties to agree. I do not accept the Minister's point there, and she may wish to challenge her officials on that.
	If someone takes on a new premises on a lease at market rent—agreed jointly between the two parties—that should remove them from the need to go through the hoop of the infamous six-step test. That is the essence of what we are trying to do here. I am not entirely confident that the exact wording of the amendment is perfect, but I hope the Minister will look at it. I ask her one thing: does she have evidence for the scope of the proposal? If not, may I ask her to commission a study before implementing the proposal any further? One danger is that I am speculating and she is speculating, but the tax is being introduced on the basis of no evidence. Will she agree to commission a study, which might answer some of the questions I am raising in the amendment?

Ruth Kelly: The hon. Gentleman is well aware that the proposals will not come into effect until 2008 at the earliest. We will keep the matter under review and we are constantly trying to improve legislation. He may not like us tabling new amendments, but where we see opportunities for improvement, we will do so. Given the attention on the issue, we will see if this is the most appropriate way to act. I do not accept the principle of his amendment, which is that where there is agreement between the landlord and the lessee, somehow the rent should not be tested after a five-year period. It is easy to avoid payment of duty in such cases. It is not a difficult process, and it is, of course, in the interest of both parties to come to a mutual arrangement under which less duty is payable. We have to be wise to that. If I remember correctly, the original five-year review was a concession to make the process much easier and to minimise the compliance burden in respect of variable leases.
	The hon. Gentleman reverts to the argument about the six-step test, which he has made on previous occasions. I can tell him that a calculator for leases is already available on the Inland Revenue website. A calculator for rent increases after 2008 is not yet available, but I can assure the hon. Gentleman that it will be introduced closer to the time. It might confuse people to have it available at the moment. There is no easy way round the issue, but our provisions strike us as representing a sensible balance between minimising the compliance burden and capturing the avoidance.

Mark Prisk: I am grateful to the Financial Secretary for her positive words, but I should like to edge her one step further, if I can be that persuasive. If nothing is going to happen until 2008, it strikes me that we have a real opportunity to assess the scope of the avoidance. That is, after all, something that Treasury Ministers do in a raft of other areas and there is a logical argument for doing so. I have not yet seen evidence that it has happened in this particular respect. Given that avoidance issues have been presented to us as being easy to deal with and something about which the Government are concerned, may I ask the Financial Secretary whether she would be willing to consider such a study? Let us see the evidence, which would happily allow us to improve the legislation. Will she agree to an independent study to assess the scope of the avoidance in order to ensure that the legislation hits the people at whom she is aiming?

Ruth Kelly: I fail to understand how it would be possible to commission an independent scoping study to establish how much potential avoidance could take place if a loophole were to exist in the future. It has not, as far as I am aware, been tried in any other area of tax law, because it is impossible independently to assess how many people would take advantage of a loophole in the legislation. I believe that we have produced a reasonably balanced compromise, reducing compliance burdens while allowing maximum flexibility. I have already given the hon. Gentleman an assurance that we will keep this under review until it is introduced in 2008. We will reflect on other proposals as and when they emerge in a constant attempt to improve the legislation. No doubt the hon. Gentleman will make his own representations to me before 2008 and I look forward to hearing them.
	On a more minor point, the hon. Gentleman asked similar questions about Government amendment No. 161. It deals with the circumstances in which one lease comes to an end and a new one is granted. Substantially the same broad interpretation will apply to ensure that rent is not taken into account twice, so there is a relieving intention behind the amendment. As to other technical points, if the hon. Gentleman will allow me, I will respond to him in writing.

Mark Prisk: I am grateful to the Financial Secretary, but I hope that she can clarify one further point now. I asked about new clause 16(7), which states:
	"The other amendments made by this section are deemed always to have had effect."
	That sounds retrospective to me, so will the Financial Secretary confirm whether it is?

Ruth Kelly: I can confirm that it is compatible with the Human Rights Act 1998 because it is a relieving measure. It has retrospective application, but, as it is a relieving measure, I do not think that anyone could possibly object to it. It is fully compatible with human rights legislation.

Mark Prisk: Given that it is retrospective, I want to register a small protest about legislation being introduced in this way. We all know that retrospective legislation often has unintended consequences. Will the Financial Secretary set out for us in writing—we have no explanatory notes—exactly how it will work and whom it will affect? I am concerned to ensure that people do not get caught out. In that process, we could minimise the number of people ending up not paying the tax that the Government feel is due.

Ruth Kelly: I would be happy to set out for the hon. Gentleman exactly how it would apply in practice. I am sure that the provision will be widely welcomed in the industry. On that basis, I commend the Government new clauses to the House and I hope that the hon. Gentleman will not press his amendment.
	Question put and agreed to.
	Clause read a Second time, and added to the Bill.

New Clause 16
	 — 
	Chargeable consideration

'(1)   In Schedule 3 to the Finance Act 2003 (c. 14) (transactions exempt from charge), in paragraph 4 (variation of testamentary dispositions etc) after sub-paragraph (2) insert—
	"(2A)   Where the condition in sub-paragraph (2)(b) is not met, the chargeable consideration for the transaction is determined in accordance with paragraph 8A(2) of Schedule 4.".
	(2)   Schedule 4 to that Act (stamp duty land tax: chargeable consideration) is amended as follows.
	(3)   In paragraph 8 (debt as consideration), after sub-paragraph (1) insert—
	"(1A)   Where—
	(a)   debt is secured on the subject-matter of a land transaction immediately before and immediately after the transaction, and
	(b)   the rights or liabilities in relation to that debt of any party to the transaction are changed as a result of or in connection with the transaction,
	then for the purposes of this paragraph there is an assumption of that debt by the purchaser, and that assumption of debt constitutes chargeable consideration for the transaction.
	(1B)   Where in a case in which sub-paragraph (1)(b) applies—
	(a)   the debt assumed is or includes debt secured on the property forming the subject-matter of the transaction, and
	(b)   immediately before the transaction there were two or more persons each holding an undivided share of that property, or there are two or more such persons immediately afterwards,
	the amount of secured debt assumed shall be determined as if the amount of that debt owed by each of those persons at a given time were the proportion of it corresponding to his undivided share of the property at that time.
	(1C)   For the purposes of sub-paragraph (1B), in England and Wales and Northern Ireland each joint tenant of property is treated as holding an equal undivided share of it.".
	(4)   In sub-paragraph (2) of that paragraph, for "sub-paragraph (1)" substitute "this paragraph".
	(5)   After paragraph 8 insert—
	"Cases where conditions for exemption not fully met
	8A   (1)   Where a land transaction would be exempt from charge under paragraph 3A of Schedule 3 (assents and appropriations by personal representatives) but for sub-paragraph (2) of that paragraph (cases where person acquiring property gives consideration for it), the chargeable consideration for the transaction does not include the amount of any secured debt assumed. "Secured debt" has the same meaning as in that paragraph.
	(2)   Where a land transaction would be exempt from charge under paragraph 4 of Schedule 3 (variation of testamentary dispositions etc) but for a failure to meet the condition in sub-paragraph (2)(b) of that paragraph (no consideration other than variation of another disposition), the chargeable consideration for the transaction does not include the making of any such variation as is mentioned in that sub-paragraph.".
	(6)   The amendments made by subsections (3) and (4) apply in relation to any transaction of which the effective date (within the meaning of Part 4 of the Finance Act 2003) is on or after the day on which this act is passed.
	(7)   The other amendments made by this section are deemed always to have had effect.'.—[Ruth Kelly.]
	Brought up, read the First and Second time, and added to the Bill.

New Clause 2
	 — 
	Access for disabled persons

'(1)   The following shall be inserted after section 29 of the Capital Allowances Act 2001—
	"29A   Access for disabled persons
	   This section applies to expenditure if a person carrying on a qualifying activity has incurred it in pursuance of a duty under section 21 of the Disability Discrimination Act 1995."
	(2)   This section shall have effect in relation to expenditure incurred in relation to chargeable periods ending on or after 1st October 2004.'.—[Mr. Bacon.]
	Brought up, and read the First time.

Richard Bacon: I beg to move, That the clause be read a Second time.

Madam Deputy Speaker: With this it will be convenient to discuss the following:
	New clause 3—Expenses of disabled employees—
	'(1)   The Income Tax (Earnings and Pensions) Act 2003 is amended as follows.
	(2)   After section 203 (cash equivalent of benefit treated as earnings), insert— "203A   Employment costs resulting from disability
	   There shall be exempted from section 203 any benefit which satisfies each of the following conditions—
	(a)   the benefit is provided to a disabled employee;
	(b)   the main purpose of providing the benefit is to enable the employee to perform the duties of his employment;
	(c)   the benefit consists in the provision of any equipment, service, or facilities;
	(d)   the benefit is made available to the employer's employees generally on similar terms."
	(3)   After section 336 (deductions for expenses, the general rule), insert— "336A   Expenses of disabled employees
	   Where an employee has a disability, a deduction from earnings is allowed for any amount incurred by him if its main purpose is to enable him to perform the duties of his employment."
	(4)   This section shall apply for the year 2004–05 and subsequent years of assessment and shall be deemed to apply for the year 2003–04.'.
	New clause 4—Definition of disability—
	   'In section 832 of the Taxes Act 1988, subsection (1), there shall be inserted at the appropriate place:
	   "disability" and "disabled person" shall, where the context so admits, have the meanings given to them by section 1 of the Disability Discrimination Act 1995, and cognate expressions shall be construed accordingly.".'.
	New clause 8—Expenditure incurred in improving accessibility for disabled persons—
	'(1)   The Capital Allowances Act 2001 is amended as follows.
	(2)   In section 23(2) after "section 29 (fire safety)", insert—
	   "29A   (disabled access)".
	(3)   After section 29 insert—
	   "29A   Disabled access
	(1)   This section applies to expenditure if a person carrying on a qualifying activity has incurred it in making adjustments within subsection (2) below to premises which he uses for the purposes of the qualifying activity.
	(2)   The adjustments referred to in subsection (1) above are those specified in subsection (3) below which are or will be required to comply with section 21 of the Disability Discrimination Act 1995.
	(3)   The specified adjustments are—
	(a)   installation of ramps to facilitate either access to the premises or use of the premises by disabled persons, and
	(b)   alterations to the premises to provide accessible toilets for disabled persons.".'.

Richard Bacon: I thank the Economic Secretary for his earlier kind words. What he said was very generous, although I have absolutely no idea whether he is correct.
	These new clauses address a number of issues in the tax system faced by disabled people. They are essentially probing clauses designed to elucidate the Government's thinking in this important area.
	New clause 2 would grant capital allowances on expenditure incurred by businesses in complying with their obligations under the Disability Discrimination Act 1995 to ease access to premises for disabled people. There is no doubt that the level of awareness of the needs of disabled people in the worlds of architecture and building design has grown significantly in recent years. For new building projects, it is often the case that careful thought and planning has been undertaken at the earliest stages in order properly to meet the needs of disabled people. None the less, it is also true that complying with the 1995 Act can impose significant costs on businesses, particularly in relation to older premises.
	New clause 2 amends the Capital Allowances Act 2001, and applies to expenditure by a person carrying on a qualifying activity who has incurred it in pursuance of a duty under section 21 of the Disability Discrimination Act 1995.
	New clause 3 recognises the extra costs disabled people incur in going to work. It would ensure that the tax system does not discriminate against disabled workers vis-à-vis their non-disabled colleagues.
	The test for a deduction of an expense incurred when carrying out one's employment has remained virtually unchanged since its introduction in 1853. The general rule is that a deduction from earnings is allowed for an amount if the employee is obliged to incur and pay it as holder of the employment, and the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment. As a judge said 50 years ago, those words are
	"stringent and exacting: compliance with each and every one of them is obligatory if the benefit of the rule is to be claimed successfully".
	One of the main purposes of the Disability Discrimination Act 1995 is to ensure that disabled people are not discriminated against in their employment. Long before that legislation was enacted, there were—and still are—a range of exemptions from tax relating to disabled people's earnings from employment, focusing on matters such as home-to-work travel, adaptation of motor vehicles for business use, early retirement on ill-health grounds, and so forth.
	As a rule, people with disabilities need to spend more than those without in performing the same tasks. Where additional expense is incurred solely by reason of their disability, one would expect a tax-neutral effect. Whether such additional expense has to come out of their own pockets, or be paid or reimbursed by a sympathetic employer, the logical result should be that people with disabilities should either receive an expenses deduction for tax purposes, or should not be assessed on any employer subsidy as a benefit in kind.
	Therefore, new clause 3 would do two things. First, subsection (2) would exempt from tax any benefit in kind provided by an employer that consisted of equipment, services or facilities, the purpose of which was to enable the disabled employee to work. Its wording is loosely based on an existing set of regulations, the Income Tax (Benefits in Kind) (Exemption for Employment Costs Resulting from Disability) Regulations 2002/1596, which attempt to do much the same thing but which unfortunately are restricted to benefits that are provided under statutory arrangements such as the access to work scheme. Secondly, subsection (3) would relax the restrictive rule governing tax deduction for employees' expenses where disabled employees spend their own money in order to be able to work.
	New clause 4 would bring the definitions of "disabled person" and "disability" in the tax legislation up to date by aligning them with the broad definition in the Disability Discrimination Act 1995. Many of the definitions of disability that are attached to tax reliefs, allowances and other forms of favourable treatment contained in the tax legislation are restrictive and outdated. The new clause seeks to introduce the more up-to-date and inclusive definition of "disability" into the tax legislation, bringing it into line with the modern thinking on disability in the Disability Discrimination Act 1995.
	Section 1 of that Act defines a "disabled person" as one with
	"a physical or mental impairment which has a substantial and long-term adverse effect on his ability to carry out normal day-to-day activities".
	There is statutory guidance to enable courts and tribunals to assess whether a person meets the requirements of the definition. The draft Disability Discrimination Bill, introduced at the end of last year as a Government initiative for the European year of disabled people, will in due course widen the definition still further. By contrast, where disability issues are dealt with in the tax legislation, disabled persons and disability are defined in such a way as to restrict the scope of the relief or the exemption being conferred, or are not defined at all, so as to leave scope for official discretion. In the former case, not all the people who could usefully benefit from the tax relief or the exemption in question are able to do so, because of the restrictiveness of the definition. In the latter case, access to the benefit or the exemption can become a lottery, depending on the attitude of the official charged with applying the legislation, particularly—as is often the case—when there is little or no departmental guidance.
	Both restrictive definitions and the absence of definitions are anachronistic and unnecessary in an era when we have the benefit of statutory definitions that recognise modern thinking on disability. Some definitions have survived intact for hundreds of years, such as the definition of "incapacitated person" in the Taxes Management Act 1970, which includes
	"any infant, person of unsound mind, lunatic, idiot, or insane person".
	With respect, I think the Treasury can probably do a little better than that.
	The Low Incomes Tax Reform Group, in its report on the issue, which was called "Disability in tax and related benefits: the case for a modern and coherent approach" and published in December 2003, recommends the adoption of the Disability Discrimination Act 1995 definition of "disability" and "disabled person" throughout the tax legislation.
	New clause 4 would enable the benefit of the tax reliefs and exemptions to be extended to all disabled people, and would provide guidance for officials charged with using their discretion to determine who is disabled and who should benefit from particular forms of tax-favoured treatment. It is unfair that some disabled people should benefit and not others, simply because the statutory definitions are out of date, ineffective, or absent.
	In conclusion, the new clauses would recognise the special costs that can face both employers and employees in ensuring that disabled people can play a full part in the workplace and would also update the definitions of "disabled person" and "disability" for the purposes of tax legislation in a way that is almost certainly overdue.

David Laws: I want to speak to new clause 8, which is, I must confess, somewhat similar to the new clause 13 that we debated in the Standing Committee. On that occasion, the Financial Secretary responded on behalf of the Treasury and I indicated that some of her points were fair and reasonable. On reflection, however, I may have been too generous in acknowledging some of the hon. Lady's points so I want to take this additional opportunity and respond to them in relation to new clause 8.
	I remind Members who were not present during our previous debate on the issue that the new clause was drafted by the CBI and the Disability Rights Commission and enjoys the support of both bodies. It relates to the duties imposed by the Disability Discrimination Act 1995, which will begin on 1 October 2004, whereby providers of services to the public will need to take reasonable steps to facilitate disabled persons wishing to make use of those services.
	New clause 8 proposes that expenditure on ramps and accessible toilets for use by disabled persons be classified for tax purposes as expenditure on plant and machinery qualifying for relief as capital allowances. That would follow the established precedent of capital allowances being given for fire safety expenditure, as is currently the case.
	In Committee on 24 June, the Financial Secretary put several counter-arguments to the new clause that we were debating, to indicate that the Treasury was not willing to support that proposal. I shall briefly run through her arguments. Her first argument was that the new obligations relating to disability access will apply to all service providers whether in the public, private or voluntary sectors, so it could be seen as unfair to give special financial support only to private sector businesses. That argument is partly countered by the fact that there is an existing precedent in relation to fire safety expenditure: it is possible to use capital allowances even though fire safety expenditure obviously relates to entities that are not merely business entities, which would have to fund such provision differently.
	The DRC sent me a note raising several issues relating to what it described as the "spurious"—I hope it will not mind my quoting that word—arguments put by the Financial Secretary to counter our proposals. The DRC said:
	"while we'd like to see more/better funding support across the board we would point out that there are sources of funding available to the public sector/voluntary sector to support physical alterations to premises which businesses cannot access".
	The commission helpfully sets out a series of areas where specific grants are made available—often through the Government—to help with disabled access. Many Members will already know about the large capital investment programme in new school buildings through the schools access initiative, designed to make school buildings disabled-accessible at very large cost. Those grants have been directly provided by the Government.
	In addition, local authorities often provide small grants for community groups and other local groups, to make their facilities disabled-accessible. Central Government provide grants to local authorities to facilitate physical access to polling stations, and other grants are available for both private and public bodies through the national lottery distribution fund, millennium funds and the Heritage Lottery Fund, which can be fruitful avenues for voluntary organisations and other groups.
	In other words, quite a number of alternative mechanisms are already available for the bodies that the Financial Secretary felt might be disadvantaged by the proposal. New clause 8 would provide a relief for businesses that do not benefit from that other Government support.
	The second point that the Financial Secretary made in arguing against such a new clause was that
	"it is clear that many of the adjustments needed to meet the requirements of the Disability Discrimination Act, including some of the most expensive adjustments, already qualify for tax relief as either a revenue expense, or through capital allowances."—[Official Report, Standing Committee A, 24 June 2004; c. 773.]
	Although that is a fair point, it is of limited relevance to new clause 8, because even the Financial Secretary was not trying to maintain that the existing reliefs relate to ramps and toilets in particular. Those are major items, which many organisations will need to purchase to make their premises disabled-accessible. Indeed, many Members of Parliament may discover that they need to make precisely those types of adjustment in the organisation of their own constituency offices. Many businesses will certainly want to make those adjustments.
	At the time, I thought that the third reason that the Financial Secretary gave for not pursuing these proposals was a hopeful sign, but on further investigation, I am not sure whether it is quite so promising as the nod and wink that she gave me reason to believe that she was giving. The third reason that she gave was that
	"we are considering the possibility of introducing such an allowance"
	to cover structural alterations
	"for most commercial buildings in the wider context of our ongoing"
	review of the
	"corporate tax regime."—[Official Report, Standing Committee A, 24 June 2004; c. 773.]
	The Disability Rights Commission's response to that point is that
	"the timing of any such changes"
	to the corporate tax regime
	"will be past the symbolically important point when the new duties come into force."
	That is obviously in a few months' time. It points out:
	"The incentive is needed now to maximise compliance by the Government's 2004 deadline . . . Moreover, it is likely that any such general allowance for expenditure on buildings would be at a rate similar to Industrial Buildings Allowance—currently 4 per cent. per annum."
	That would be too small to make any difference to small and medium-sized enterprises, which are likely not to have made the necessary adjustments to disabled access already. It is likely that larger entities have already allocated expenditure for those purposes. They may even have completed that expenditure.
	The final point that the Financial Secretary made on the issue was that the Department for Work and Pensions had discovered that cost was not a factor for many entities in making provision for disabled access. That may well be the case for the larger entities that have already undertaken a lot of those works and made the relevant expenditure, but it is not likely to be the case for many SMEs. The Financial Secretary indicated in Committee that it might be unfair to introduce a new tax allowance, which other entities could not have taken advantage of earlier, to facilitate conversion for disabled accessibility, but we must appreciate the fact that such an allowance could largely benefit the smaller businesses that are struggling to pay the cost of making their premises disabled-accessible. In other words, the allowance might turn out to be well targeted as a consequence of its late introduction, as it would probably affect particularly those businesses that are struggling to make such provision and that will find it most difficult financially to make those conversions.
	On reflection, I might have been a little generous by accepting some of the points that the Financial Secretary raised on 24 June. However, I understand that the Economic Secretary will respond to today's debate, so there is hope for us. Perhaps he will accept that his colleague's arguments were not entirely convincing and respond positively to some of the arguments that have been put forward by the Disability Rights Commission and the CBI—a powerful alliance of two bodies with special interest and expertise in the matter. In the light of comments on the Financial Secretary's arguments, I hope that the Economic Secretary will indicate that the Government will undertake a more constructive and positive approach.

John Healey: I am not sure whether I will disappoint the hon. Member for Yeovil (Mr. Laws) or not—he will have to wait and see—but as he would expect, I am entirely as one with my hon. Friend the Financial Secretary. We take seriously the arguments and evidence put to us by the Disability Rights Commission. I hope that I can give him an indication of the consideration that we are giving to the cases that it and others put to us.
	The four Opposition new clauses relate to disability issues across the tax system. Labour's manifesto included a pledge to establish comprehensive and enforceable civil rights for disabled people, so I welcome the opportunity to reaffirm our strong commitment to those rights. I can also confirm that the Low Incomes Tax Reform Group, to which the hon. Member for South Norfolk (Mr. Bacon) referred, the Disability Rights Commission and the CBI are in detailed, continuing discussions with our officials on the range of issues covered by the new clauses and the points raised by the hon. Members for Yeovil and for South Norfolk. I place on record our appreciation for the thoughtful contributions that those organisations are making to help us to assess the case for future policy changes.
	Given our strong commitment to the rights of disabled people and our support for them, we have no quarrel with the motivation behind the new clauses. However, we are not yet convinced that the specific changes to the tax system that they suggest would represent the best way of improving the rights of, and support for, disabled people.
	New clauses 2 and 8 would provide capital allowances for the costs that businesses might incur when making their premises reasonably accessible to disabled people. As the hon. Member for South Norfolk made clear, the requirement on service providers to make their premises reasonably accessible derives from the Disability Discrimination Act 1995, which was passed by the previous Government. At the time, that Act was an important step forward for disabled people's rights, and we have been able to build on it. The requirement comes into effect in October this year.
	New clauses 2 and 8 are similar in purpose to the new clauses 5 and 13 that were debated in Committee and subsequently withdrawn. However, new clause 2, which was moved by the hon. Member for South Norfolk, has a wider scope than those new clauses because its provisions are not limited to specific items of expenditure such as access ramps or accessible toilets. Our reasons for resisting it at this stage are compounded by our worry that such broad provisions could be manipulated and carry a high Exchequer cost. Additionally, as the provisions are broadly drawn, they could impose a significant compliance burden on taxpayers and the Inland Revenue, which would administer the scheme.
	Like the previous Government, we have consistently encouraged all businesses to make adjustments as early as possible, rather than waiting for the provisions in the 1995 Act to come into force in October 2004. Common sense would suggest that many would think it unfair to introduce allowances at such a late stage. That would be especially unfair to businesses that had already acted promptly in the interests of disabled people by promoting the access that they may need. Research commissioned jointly by the Disability Rights Commission and the Department for Work and Pensions in 2002 showed that 40 per cent. of providers had made adjustments. Only 15 per cent. of respondents said that they had plans to make further adjustments to comply with the Disability Discrimination Act 1995. The research found that the cost of making adjustments to comply with the Act tended to influence the manner and timing of the adjustments rather than whether they were made at all. We have therefore concluded, as my hon. Friend the Financial Secretary has made clear, that the changes to the capital allowances system proposed both today and on an earlier occasion would not confer a significant benefit.
	The research confirmed that many adjustments needed to meet the requirements of the Act, including some of the most expensive, already qualify for tax relief, either as a revenue expense or through existing capital allowances. The cost of structural alterations to most commercial buildings is not covered by the capital allowances regime, but we are considering the introduction of allowances for commercial buildings in the wider context of our ongoing project to reform corporation tax.

David Laws: Will the Economic Secretary give way?

John Healey: May I just make an observation about the points made by the hon. Gentleman? If he still wants to intervene, I shall give way. He is sharp in wanting to intervene, but perhaps he will be patient while I explain that the fire safety example that he gave does not give the lie to my general argument.

David Laws: The Economic Secretary suggested that there might be a change to the corporation tax regime that would provide relief for some of the expenditure that we have discussed. Surely, however, that would take effect too far into the future?

John Healey: I cannot give the hon. Gentleman a time scale for the completion of the work or the decisions that will flow from it, but it is unlikely that we will have conclusions from the review or legislation in place by the October start date of the provisions of the Disability Discrimination Act.
	The new obligations under the Disability Discrimination Act will, as my hon. Friend the Financial Secretary has argued before, apply to all service providers, whether public, voluntary or private, so giving special financial support only to private businesses could be seen by other sectors as unfair. As I have just said, the example of fire safety cited by the hon. Member for Yeovil does not give the lie to the general argument. The list of grants, many of them modest—he used the phrase "quite a number"—available to some organisations does not undermine the argument against providing special treatment for the private sector in preference to other organisations that must meet the requirements of the Act.
	New clause 3 proposes further tax relief for disabled people for employment benefits and expenses. Under existing law, wherever equipment, facilities or services are used wholly, exclusively and necessarily in carrying out the duties of employment, there is no benefits charge where the employer provides the items in question. Where employees themselves pay the cost, there is a full deduction against earnings, so problems do not arise in those cases, as the hon. Member for South Norfolk acknowledged. Where equipment, services or facilities such as specially adapted wheelchairs or hearing aids are provided for disabled people for work purposes, but for which there is some private use at home, there is a general exemption. Beyond that, in June 2002 we introduced regulations—the hon. Gentleman referred to them—which ensure tax exemption for any benefits provided to disabled employees under any statutory arrangements, provided that the main purpose of the benefit is to enable the employee to perform the duties of an employment.
	The hon. Gentleman made a parallel point when he said that the benefits exemption was too narrow because it was confined to provision under statutory arrangements. In our experience that is unlikely to be significant. As regards cases where benefits are not provided by employers under statutory arrangements, I should be glad to see any specific examples that he may have.
	Furthermore, as the hon. Gentleman mentioned, an employer can provide transport for disabled employees, and pay for or reimburse their transport costs to enable them to commute to and from work, without any tax charge. Where additional costs are a necessary part of a disabled employee's employment, he or she can already claim a deduction for those costs.
	To go beyond that would make it difficult to target the relief effectively and to devise an affordable scheme. The expenses rule proposed in the new clause could entail considerable costs and is likely not to be properly targeted at helping disabled employees with the additional employment expenses that they incur as a result of their disabilities. In summary, the existing provisions together provide a comprehensive benefits exemption and expenses relief, along the lines of the provisions set out in the new clause.
	Finally, new clause 4 proposes the use of the Disability Discrimination Act 1995 definition of disability across the tax Acts. At this stage I am not convinced that that is necessary or desirable. The insertion suggested into section 832 of the Income and Corporation Taxes Act 1988 would not override the existing definitions in use. It would apply only to the few provisions in which disability is not defined. I shall return to that in a moment.
	The hon. Member for South Norfolk mentioned the work of the Low Incomes Tax Reform Group and the report that it produced. That report gave examples of areas where there is a lack of explicit definition of disability, but many of the areas cited as examples, such as council tax or power of attorney, lie outside the Taxes Act and therefore would not be affected by the new clause.
	I am uneasy about the new clause. The DDA definition is not settled or certain at present. It allows exclusions, and as the hon. Gentleman acknowledged, the draft disability discrimination Bill proposes further changes to that definition. The main area of the Taxes Acts where the word "disability" is not currently defined is in relation to the taxation of certain payments from insurance policies. In some cases it is possible that a policyholder might receive less favourable treatment if the DDA definition were used.
	I hope that Opposition Members will accept that these are matters that we are discussing in detail with groups that are interested in representing disabled people or representing employers of disabled employees. I hope that hon. Members will feel that the debate has been a useful contribution to that process and that they will not press the new clauses to a vote.

Richard Bacon: I thank the Economic Secretary for that useful and detailed reply. I agree that the debate has been constructive, and I hope he will feel that our having raised these matters has enabled him to set out the Government's policy more fully. I join him in paying tribute to the Low Incomes Tax Reform Group and to the Disability Rights Commission and the CBI for the important work that they are doing. I indicated that the new clauses were probing measures, and I hope that they have served their purpose. On that basis, I beg to ask leave to withdraw the motion.
	Motion and clause, by leave, withdrawn.

New Clause 5
	 — 
	Amendment of Individual Savings Account Regulations 1998 (SI/1998/1870)

'(1)   The Individual Savings Account Regulations 1998 (SI/1998/1870) shall be amended as follows.
	(2)   In paragraph (2) of Regulation 4—
	(a)   the words "£7,000 for the years 1999–00 to 2005–06 and £5,000 for subsequent years," shall be replaced by "£7,001"; and
	(b)   the words "£3,000 in the years 1999–00 to 2005–06 and £1,000 in subsequent years" shall be replaced by "£3,001".
	(3)   In paragraph (2A) of Regulation 4, the words "£3,000 in the years 2001–02 to 2005–06, and £1,000 in subsequent years" shall be replaced by "£3,001".
	(4)   In paragraph (2B) of Regulation 4, the words "£3,000 in the years 2001–02 to 2005–06, and £1,000 in subsequent years" shall be replaced by "£3,001".
	(5)   In paragraph (3)(a) of Regulation 4, the words "£3,000 for the years 1999–00 to 2005–06, and £1,000 for subsequent years" shall be replaced by "£3,001".
	(6)   In paragraph (2) of Regulation 7, after sub-paragraph (a) insert—
	"(aa)   shares, not being shares in an investment trust, issued by a company wherever incorporated and traded on the market known as OFEX;".
	(7)   In paragraph (5) of Regulation 7, after sub-paragraph (c) insert—
	"(d)   that the securities are traded on the market known as OFEX.".'.—[Mr. Prisk.]
	Brought up, and read the First time.

Mark Prisk: I beg to move, That the clause be read a Second time.

Madam Deputy Speaker: With this it will be convenient to discuss new clause 6—Tax credits for ISAs and PEPs—
	   'Section 76(1)(a) of the Finance Act 1998 (c. 36) shall cease to have effect.'.

Mark Prisk: I begin by declaring that I have two individual savings accounts—sadly, I do not have any more than that—and that a member of my family works for the Financial Services Authority.
	New clause 5 seeks to highlight the Government's plans further to diminish the benefits of ISAs by reducing the tax-free limits for savers and to include investments through the Ofex market, which is a key source of funds for many of the UK's smallest ventures, in the ISA wrapper. As such, it is a probing measure that seeks to help savers and stem the loss of confidence in ISAs.
	The Government accept that Ofex securities should be included within the ISA tax-free wrapper, but they have unfortunately decided to defer that change for nearly two years until April 2006. Ofex is a highly effective source of finance for our smallest enterprises. Indeed, it is specifically focused on the £500,000 to £5 million to £10 million range, and it is generally accepted as offering an excellent means by which to bridge the equity gap. It is therefore peculiar that, given the Government's stated commitment to closing that gap, the Treasury should wait for two years before acting.
	The second problem with that delay is that alternative investment market securities are already eligible, so there is a danger that a distortion could occur in the market and, indeed, in savers' investment decisions. Given that AIM securities tend to favour larger companies, the smallest enterprises might continue to lack funds, which the Government say that they want to encourage to be brought forward. Given the inclusion of AIM securities, why not include Ofex? Our smallest enterprises deserve the same chance of capital investment, so why wait?
	The other aspect of new clause 5 is the retention of the established tax-free limits for savers in ISAs. Saving is sadly in danger of becoming a lost habit in this country—the ratio for savings has halved since 1998, and net retail investment in funds last year was among the worst in the past decade. The Government's decision to reduce the tax-free limits from £7,000 to £5,000 on maxi ISAs and from £3,000 to £1,000 on cash ISAs will only make things worse.
	A recent survey by Invesco Perpetual shows that 35 per cent. of current equity investors will reconsider their investment, and 17 per cent., which is nearly one in five investors, may choose not to invest at all. Mr. Mike Webb, head of distribution for Invesco Perpetual, said:
	"Our research proves that people are angry and confused by the Government's planned changes. The Government needs to be clear on what it wants to convey to investors. It talks openly about people needing to provide for their future, yet it plans to take away the very thing—tax incentives—that encourages people to save in the first place."
	Mr. Webb is right.
	If saving is to be encouraged, the Government are sending out the wrong signals by cutting those limits. The result could be that the savings ratio falls still further, leaving future generations increasingly vulnerable to events. We now need a period of stability for savers prior to any review in 2006; in other words, the limits should remain as they are. After all, what credible alternatives are the Government offering? Can the Minister tell us, for example, why savers should commit themselves over the next two years to a savings product that the Government are running down? In the absence of a credible Government alternative, does not the Minister recognise that a two-year hiatus will only further erode people's willingness to save?
	The Government have committed themselves to a review in 2006, but what does that mean in practice? Will a review begin in 2006, or will the Government present their final decision in that year? If it is the latter, does not that further extend the delay? I hope that the Minister will be able clearly to set out, both for savers and for the financial services industry, exactly what the commitment means and when we can expect decisions and statements.
	New clause 6 would reverse the Government's abolition of the 10 per cent. tax credit received by savers on their dividend payments. That would help current savers and future generations alike. In particular, it would ensure that all taxpayers, rich or poor, enjoyed the same incentives to save. I stress that this is a probing new clause.
	The tax credit originates from the advance corporation tax regime that the Chancellor abolished in 1997. Hon. Members will recall that the result of that decision was to slash £5 billion a year from the value of people's pensions and investments. That was, frankly, an act of daylight robbery that will cost millions of people thousands of pounds. What is worse, many of those people remain, even today, unaware of just how much the Chancellor has short-changed them. It was, and still is, the worst and most insidious of this Government's stealth taxes.
	When the Chancellor raided our savings and pensions in 1997, he also cut the dividend tax credit to 10 per cent. and the dividend income tax rate to 32.5 per cent. for higher rate taxpayers. Then, in the Finance Act 1998, he sought the abolition of the tax credit altogether, with effect from April this year. The net result, ironically, discriminates in favour of higher rate taxpayers over everyone else. The combined effect of the changes to the dividend tax credit and income tax rates strips away any tax incentive for basic rate taxpayers to invest in an equity-based ISA. Cash and bonds are still worth it, but not shares. Do not the Government believe that everyone who is trying to save should enjoy similar tax incentives? Why discriminate by precluding basic rate taxpayers from something that the richest in the land can enjoy? I hope that the Minister will be able to show us where in Labour's manifesto it says that Labour will provide a tax break for the few, not the many.
	Last year, when my party tabled a similar new clause, the Minister argued that the markets, not the Government's actions, were encouraging people to invest in anything but shares. Since then, the stock markets have improved, yet there is still a residual problem. The recent survey conducted by Invesco Perpetual found that 47 per cent. of equity ISA investors will be less likely to invest in those ISAs because of this abolition—nearly half of investors are turning away from equity ISAs. Indeed, 13 per cent. said that it will put them off saving altogether. As the PEP and ISA Managers Association and the Investment Management Association said in their recent paper of earlier this year,
	"ISAs are a successful and simple savings product and should be at the centre of the Government's strategy to encourage long-term savings. This is not the time to be undermining them."
	The Government like to claim that any tax benefits are small, with the average tax credit being around £25. In fact, the actual benefits will vary widely. The whole point of saving is that every pound counts, especially over the long term, and every time the incentives diminish, the savings habit declines. Is that the Government's intention, or an unintended consequence of their proposals? I hope that the Minister will be able to tell us.
	Indeed, in total tax terms, the benefit of this abolition will be far from small for one organisation. The Treasury has failed to highlight the small fact that the Inland Revenue expects to save £200 million every year. That is £200 million that will be lost to savers. Another result of the abolition of this tax credit will be to skew savers towards cash and bonds, distorting the market and therefore distorting prices. Equally, some investors might be pushed towards cash-based and bond-based ISA products when an equity-based product might be far more suitable for their needs. The Government are rightly quick to condemn advice that encourages savers to choose inappropriate products, yet here we have a policy that could well have exactly that effect. Never mind mis-selling, this is mis-taxing, and I wonder who will police the Treasury. This is another example of the Government's meddling with the tax system distorting people's decisions and investments, to their own and the markets' detriment.
	The Conservative party believes that the halving of the savings ratio represents a dangerous trend, which the Government have at best neglected and at times encouraged. Savers have been short-changed by Labour, not least by the abolition of advance corporation tax. We believe that savers need certainty and encouragement, and we want to hear why the Government are intent on further eroding the incentives to savers in the absence of any credible alternative. The new clauses seek to encourage savers and to help small enterprises. I hope that the Government will be wise enough to think again on this, and I look forward to the Minister's reply.

Ruth Kelly: The hon. Member for Hertford and Stortford (Mr. Prisk) has outlined the reasons behind his new clauses. The effect of his proposals would be to change the current secondary legislation, the regulations that govern investment in ISAs, through the Finance Bill and to reintroduce the 10 per cent. payable tax credit into the ISA.
	The effects of new clause 5 would be twofold. First, it aims to extend the maximum investment limits for an ISA from £7,000 to £7,001 indefinitely. It would also increase the maximum amount that could be invested in cash savings within an ISA to £3,001. The purpose of that would be to retain the current annual investment limits for an ISA. The ISA regulations currently provide for these to be reduced in April 2006. The second effect would be to allow ISA investors to invest directly in stocks and shares traded on Ofex. Although Ofex is regulated for certain purposes—such as market abuse and insider dealing law—it is not a recognised stock exchange for the purposes of the Inland Revenue. Investors are therefore currently excluded from directly holding shares in companies traded on it within their ISA.
	New clause 6 aims to reintroduce the 10 per cent. payable tax credit into the PEP and ISA regime. This credit was, until April this year, paid on top of UK dividends received on investments held in a PEP or ISA. I should like to cover each of these proposals separately, as each raises quite different issues. I shall deal first with the ISA investment limits. ISAs are the Government's primary vehicle for tax-free savings outside pensions. They have helped to make saving easier for ordinary investors. We do not believe that amending the ISA limits in the way the hon. Gentleman suggests would be appropriate at this stage, for the reasons that I shall set out.
	When the ISA limits were first announced in the Budget in 1998, we made it clear that ISAs had two key objectives. The first was to develop and extend the savings habit. The second was to ensure that tax relief on savings was more fairly distributed. The aim was to rebalance the tax benefits provided through the PEP and TESSA, and to focus more on encouraging non-savers to start saving and those who saved little to save more. To achieve that, the maximum limits for investment were set at £5,000, with a maximum of £1,000 in cash savings, but for the first year those limits were increased to £7,000 and £3,000 respectively, to encourage take-up and to smooth the transition to the ISA. Those higher limits were subsequently retained until 6 April 2006, which is more or less two years from now. I put it to the hon. Gentleman that those limits are extremely generous: they have allowed savers to build up very substantial sums in savings, free of tax, as the amounts that they subscribe to the ISA accumulate year on year. Therefore, we need to keep the limits under review, to ensure that the ISA is still achieving its objectives.
	The ISA has already started to change savings habits. Fifteen million individuals have invested in an ISA account, saving around £130 billion—one in three of the adult population are saving in an ISA, which is a far greater number than ever saved in a PEP or TESSA. The ISA has also been extremely successful in attracting individuals from groups who were previously under-represented in the PEP and TESSA. Around one in five ISA savers, for example, are from lower-income groups, compared with one in seven who had either a TESSA or PEP. Similarly, the number of people under the age of 25 with an ISA is more than double the number who had either a TESSA or PEP.
	We are not complacent, however. Of course, we continue to keep all savings incentives under review, which is one reason why we are piloting the savings gateway scheme, which aims to provide more effective savings incentives to those on low incomes, who benefit less from the tax incentives provided through an ISA. It is also why, for example, we have developed the child trust fund, to provide children with the financial education that they need to understand their savings options, and to ensure that in the future, all children have some form of financial asset available to them at the age of 18—

Mark Prisk: Will the Financial Secretary give way?

Ruth Kelly: Before I give way to the hon. Gentleman, I urge him to consider that there are two years to run before the ISA limits are due to change. We announced the higher level as a transitionary measure to ensure the success of the ISA and to encourage people to save. We will, of course, continue to review the ISA limits. We have made no announcements on that, subject, of course, to the 10-year guarantee provided by the Chancellor that savers should benefit from tax relief on up to £5,000 in savings each year until at least 2009.

Mark Prisk: Why would a saver wish to invest in a product to which the Government seem to have no commitment over the next two years? Does not the Financial Secretary understand that if an individual is trying to save for the next five, 10 or 15 years, the knowledge that that is a product in which the Government seem to have little confidence, because they are diminishing its effect, leaves open the question: why would one bother? Of course, that would further lower the savings ratio.

Ruth Kelly: The hon. Gentleman has a perverse view of the effects of the Chancellor's announcements. In fact, going back to the introduction of the ISAs, the higher limit was introduced purely as a first-year measure to encourage take-up in the initial year. The next positive announcement made by the Chancellor was to extend that until April 2006. We have not yet commented on what we will do after that, although, of course, we keep the limits under review. As the ISA regulations stand, however, they are due to end in April 2006.

Mark Prisk: Will the Financial Secretary give way?

Ruth Kelly: I give way to the hon. Gentleman, but I have not yet finished covering his first point.

Mark Prisk: I am keen to try to draw out the full detail. What I am concerned about is the transition period. Given that in the past few years, under this Government, the savings ratio has fallen, does this not simply compound the existing problem? I could understand it if the savings ratio were booming—there might be an argument at that point. Given that it is falling, however, how can she do it?

Ruth Kelly: The hon. Gentleman may have noticed that I had some debate with the right hon. Member for West Dorset (Mr. Letwin) last night about the relevance of the savings ratio as an indication of long-term savings in this country. I would argue that it was artificially high for periods during the late 1980s, as inflation was high: people were retrenching their finances, and saving as a precautionary measure in those circumstances. If we consider the Bank of England analysis of the savings ratio adjusted for inflation, we have a significantly higher savings ratio now than we have had historically. Of course, we are not complacent, and millions of people are under-saving for their retirement. That is why we have introduced our informed choice strategy, alongside a new suite of Sandler stakeholder products. We could have a long debate about savings now, but perhaps you will agree, Madam Deputy Speaker, that we should focus on the amendments and new clauses under consideration today.
	Of course, we have a commitment to the ISA. We have made it absolutely clear that there is a 10-year guarantee on ISAs. Savers can benefit from tax relief on up to £5,000 in savings, each year, until 2009. We are committed, on an annual basis, to reviewing the tax reliefs, to make sure that the product remains attractive and meets the underlying objectives, which I set out at the beginning of my comments: to provide an attractive savings environment while ensuring that tax relief is more fairly distributed among all taxpayers. While we are considering the position with respect to ISAs, we are also encouraging savings in a number of other ways that I have already described, including the savings gateway and the child trust fund. We shall continue to test our measures against the objectives that they are designed to meet.
	The hon. Gentleman is correct in his claim that ISA investors cannot hold stocks or shares traded on Ofex, but he is not correct about AIM. It is not a registered exchange, and therefore does not meet the criteria either. ISA investors who choose to invest directly in stocks or shares are limited to those listed on a recognised stock exchange. There are good reasons for that. The ISA is by its nature aimed at the less sophisticated investor. These are individuals who historically would not have considered investing in stocks or shares. It is only right that we initially encourage people to invest in products that are regulated in a way that gives investors an appropriate level of protection. That is what the UK listing rules aim to achieve. Similar aims apply to recognised stock exchanges worldwide. Other markets that are not recognised stock exchanges are not always subject to such requirements. For individuals who wish to invest directly in stocks and shares, we believe that it is still right to restrict investments to stocks and shares quoted on a recognised stock exchange.

Howard Flight: If the Financial Secretary believes in what she has just said, why is she arguing in a different context that no such investment restrictions should be placed on the same individuals' stakeholder pensions?

Ruth Kelly: That is probably what caused the confusion in the mind of the hon. Member for Hertford and Stortford, because we are liberalising the pensions regime. We had a long discussion in Committee about why that was appropriate. I do not intend to repeat all the arguments that we had then about why ISAs aimed at retail investors should be treated differently. The hon. Gentleman has had sufficient opportunity to rehearse those arguments.
	It would not be desirable to add Ofex to the ISA without considering the wider implications and ensuring that fair treatment is given to all markets. Let me give a couple of examples. First, in the light of EU requirements, we could not add an unrecognised market in the UK without extending the same treatment to other unrecognised UK markets, and potentially to all similar markets in the EU including those in the new member states. Indeed, there might be pressure for the extension to be made worldwide. We are talking about a fundamentally different proposition in respect of ISAs. Secondly, unlisted companies traded on markets that are not recognised stock exchanges also potentially benefit from a different range of tax incentive schemes to encourage wider investment. It is surely only right for us to consider whether they should continue to benefit from those schemes before giving investors in those companies access to tax benefits available only for investments listed on recognised stock exchanges.
	Again, we shall continue to keep the savings incentives provided through the tax system under review, especially in the light of wider developments in the savings and investments arena; but on balance we think it inappropriate to make the changes proposed here without proper consideration of all the wider factors.
	The 10 per cent. payable tax credit was removed for ISA purposes in April 2004. It was abolished more generally in 1999 as part of our wider corporation tax reforms. I understand that there is a heated debate in this place about the merits of those reforms, but as the hon. Gentleman knows, they were aimed at removing a major distortion in the tax system which encouraged companies to pay out their profits as dividends rather than retaining them for reinvestment in the business. The intention was to create a more profitable UK business sector over the longer term through productive investment, and more wealth for the UK economy and investors as a whole.
	When the retention of the tax credit for the ISA and PEP regimes was announced in March 1998, the Chancellor made it clear that it was only a transitional measure—for a period of five years, up to 5 April 2004—to give investors time to adjust their portfolios. Outside the PEP and ISA, only a non-taxpayer would have benefited from the payable tax credit; but non-taxpayers investing in shares outside an ISA or PEP have not had the benefit of the tax credit since 1999.
	The payable tax credit was paid to all ISA investors, whether they were higher rate, basic rate, starting rate or non-taxpayers, at a cost to the Exchequer of around £250 million a year. The withdrawal of payable tax credits for ISAs and PEPs simply means that an additional payment is no longer being made—an additional payment that mainly benefited higher rate taxpayers and people with a lot of capital to invest.
	The change does not affect all ISA savers. Of the 15 million people who have saved through ISAs since 1999, only 6 million could be affected by the change, and that is if the ISA stocks and shares investment that they hold provides income through dividend payments. In addition, we think that around 1.6 million PEP investors may be affected.
	I accept that there has been a lot of concern about the impact on basic rate and lower rate taxpayers and non-taxpayers but, as we made clear in the debate last year, the average payable tax credit received each year per person was worth only £25, a fact to which the hon. Gentleman referred. In reality, the vast majority of ISA investors saw far less than that. Over half of the investors benefited by less than £10 a year, and two thirds benefited by less than £20 a year.
	Only 3 per cent. of basic rate taxpayers investing in shares within an ISA will have their tax benefits reduced by more than £100. Those are investors who have taken advantage of the ISA investment limits to build up high levels of tax-free saving and who have already benefited from the additional generosity of the payable tax credit over the past five years. All investors, however, including those holding shares through ISAs and PEPs, should benefit from the improved long-term company performance resulting from the 1999 corporation tax reforms.
	I do not think that the new clauses are appropriate, necessary or desirable. I ask hon. Members to reject them.

Andrew Mitchell: I draw the House's attention to my interests, which appear in the Register of Members' Interests.
	I support the new clause so ably introduced by my hon. Friend the Member for Hertford and Stortford (Mr. Prisk). As he rightly said, it is clearly a probing measure. It is designed not to increase the limits on the financial instruments by £1 but to test the Government's view on these important matters.
	I was struck by the fact that the Financial Secretary quoted Government comments in 1998 and spoke of the importance that the Government said should be attached to—I think I quote her exactly—getting the savings habit. She said that the Government wanted to send some signals about saving in the measures that they introduced in that year. All I can say is that I believe that the Government, in the whole area of savings, which are important to all of us in our individual lives, have shown extraordinary complacency in the way in which they have allowed their policies on savings to develop.
	The Government certainly mouth the mantra of saving. We have had lots of new policies, new initiatives and an unbelievable number of consultations but, when the savings ratio is at an all-time low, it is clear that the Government pay little attention, if any, to the serious risks for all of us in the lack of savings in our economy—risks that do not pertain hugely to the highest earners in the land but very much pertain to those in middle Britain, the many ordinary people whose savings are now so low and whose security in old age will be at great risk as a result.
	The Government's attitude to savings is epitomised by their response to the new clauses. How have we got ourselves into this dreadful position with savings? The Chancellor of the Exchequer is, rightly, desperate to maintain the strong economy, but it is underpinned by consumption, a housing boom, enormous debt, which the shadow Chancellor set out in the House last night, and a massive Government job-creation scheme. As a result, the Chancellor has no serious intention of encouraging people to save, because to do so would undermine the nature of the economy as it is today. He wants to encourage people to save like he wants a hole in the head. That is extremely dangerous for our future, which is why I want to detain the House very briefly on the new clauses. They relate to one of the most important aspects of the Bill, which is why I am so pleased that my hon. Friends decided to move them.
	I remind the House of the savings climate in 1997, when the Government came to power. We had expanding tax-exempt special savings accounts and personal equity plans, which this Government re-branded as individual savings accounts. The intellectual climate was such that the Secretary of State with responsibility for such matters introduced "pension plus", which was designed to encourage a massive boost in savings throughout the country. I remind the Financial Secretary that in those days Britain had more savings through funded pensions than the whole of the rest of the European Union. Many more people owned TESSAs and PEPs than are saving in their equivalent today.
	Savings have become ever more necessary for old age. People no longer retire at the age of 65 to a pair of slippers and entry into the ante-room of the afterlife. People now live and work for much longer than their parents and grandparents ever did. Of course, the old age of many who are retiring now is underpinned by defined benefit schemes—company pensions—that were built up in the good times. That is not the case today, as we all know so well.
	The problem that we all face with our savings is immense. Although the Government are not wholly responsible for the scale of the problem, the £5 billion per annum raid on pension funds certainly has not helped, as my hon. Friend the Member for Hertford and Stortford said. It has wiped billions of pounds off the value of pension funds, and in the case of many companies it has been coupled with the demise of the defined benefit scheme, which benefited many people in their retirement. The stakeholder pension was a flop, and the pension credit scheme is stark raving bonkers. Under the terms of that scheme, some 80 per cent. of people will be dealt with through a means-tested approach. It has fundamentally undermined the savings—

Madam Deputy Speaker: Order. I hope that the hon. Gentleman will relate his remarks to the new clause under discussion.

Andrew Mitchell: I certainly will, Madam Deputy Speaker, but I just wanted to place the new clause in the context of the dire complacency that the Government have shown in all areas of saving.
	When the Government came to power, TESSAs were a very important savings instrument. Through PEPs, one could save £12,000 per annum but, as the Financial Secretary said, this Government have reduced the savings level to £7,000 per annum. Now, it is being reduced to £5,000 per annum. What sort of signal does that send? As the Financial Secretary will doubtless appreciate, over recent years and in a falling stock market environment, the nature of ISAs has saved the Government tax, because capital gains losses have not been reclaimable from the Inland Revenue.
	I remind the Financial Secretary of what the polls and industry have themselves said about the measures that she proposes to introduce. Research conducted by YouGov reveals that once the tax credit on dividends paid out by shares held in an equity ISA is withdrawn, almost half of all equity ISA investors will be less likely to invest in them. One in eight ISA investors say that they will probably not invest any more. Tony Vine-Lott, director general of the PEP and ISA Managers Association, said:
	"ISAs have proved the most popular savings vehicle this Government has introduced, and now form a key part of day-to-day retirement savings for millions of people. To ensure the continued success of the ISA scheme, we urge the Chancellor to drop his plans to abolish the ISA dividend tax credit and the reduction in ISA subscription limits."
	Furthermore, the Skipton building society said that 80 per cent. of savers questioned think it wrong to cut the tax-free savings limits for cash mini-ISAs from April 2006. Some 45 per cent. said that that would put people off saving. Meanwhile, the Government want to promote stakeholder products and the child trust fund. TESSA customers said that the tax-free element of that account had been a big draw.
	Figures based on data retrieved from the Inland Revenue website covering the financial years from 1999–2000 to 2002–03 show that subscriptions to maxi-ISAs have declined by 40 per cent. Moreover, the average subscription has declined from £4,620 to £3,890—a fall of almost 16 per cent. Average subscriptions in mini-ISAs of stocks and shares—often used by the lower-income families about whom the Chancellor is so concerned—have fallen from £1,240 in 1999 to £1,070 in 2002.
	Those figures should greatly distress the Government, given that, during the financial year 2000–01, 52 per cent. of mini-ISAs in stocks and shares were subscribed to by individuals with an income of £10,000 or less.
	I urge the Financial Secretary to repent of this great mistake in the signals that she sends to people about the importance of saving. I urge her to say clearly what she hinted at, in a slightly backhanded way, in response to my hon. Friend the Member for Hertford and Stortford, and to make it clear that the Government have every intention of regularly increasing the level—rather than reducing it from £7,000—to send the clear signal that we need to increase the amount that we save throughout society.
	If the Financial Secretary does not do that, when the Government's epitaph is finally written, the fact that they were asleep when this country faced a massive savings crisis will be towards the top of their charge sheet. She must think again and send a clear signal that far from reducing the levels of saving one can make through this device, she will increase them significantly.

Mark Prisk: We have had a useful debate and my hon. Friend the Member for Sutton Coldfield (Mr. Mitchell) has demonstrated his expertise on the subject.
	The Minister's response, sadly, offered no hope to the ordinary saver. I note her remarks on Ofex and I hope that she will reflect on the points that have been raised. Many hon. Members will be disappointed by the Government's failure to realise that the halving of the savings ratio is storing up real problems for the future.
	On tax limits, the measure may well have been temporary when it was introduced, but any self-respecting Government would have responded more effectively to the situation before them and not to their own bank balance. As for the abolition of tax credits, is it not peculiar, Madam Deputy Speaker, that a Labour Minister should proudly promote a policy that discriminates against basic rate taxpayers, and does so—not as I meekly suggested—for a £200 million benefit to the Treasury, but for £250 million? I hope that ordinary basic rate savers will know where their money has gone.
	I said earlier that these were probing new clauses and I hope that where the Government and the Opposition stand has now been put on the record, so I beg to ask leave to withdraw the motion.
	Motion and clause, by leave, withdrawn.

New Clause 7
	 — 
	Application of sections 298 to 301

'Sections 298 to 301 above shall apply to situations where a promoter sells or markets a scheme; and in this section, "Scheme" means a notifiable proposal or notifiable arrangements.'.—[Mr. Flight.]
	Brought up, and read the First time.

Howard Flight: I beg to move, That the clause be read a Second time.

Madam Deputy Speaker: With this it will be convenient to discuss the following amendments:
	No. 39, in page 255, line 22 [Clause 300], leave out 'the prescribed period' and insert 'thirty days'.
	No. 40, in page 255, line 31, leave out 'the prescribed period' and insert 'thirty days'.
	No. 42, in page 259, line 12 [Clause 309], at end insert—
	'(2A)   Regulations made by the Treasury or the Board under this Part may provide for a threshold below which arrangements shall not be notifiable arrangements under section 298(1).'.
	Government amendment No. 222.

Howard Flight: There has been a great deal of discussion in the media and important lawyers have written to the Treasury and the Inland Revenue about the new regime for the reporting of tax avoidance schemes. The Paymaster General has responded to a significant number of the issues raised and Conservative Members are pleased that she has done so in the interests of the British economy.
	There remains, however, a central unresolved issue, which we call the dividing line. There is pretty much unanimous agreement that a regime requiring the disclosure of tax avoidance schemes that are being marketed is a sensible measure both as a deterrent and in order to make the Inland Revenue more actively aware of what is going on. Without a dividing line, though, and as a result of the drafting of the provisions, it is unfortunately probable that in order to protect themselves, large numbers of company accountants will feel obliged to report normal tax planning circumstances. The money that the Government are budgeting for the task and the numbers of extra staff employed at the Revenue will be wholly inadequate to cope with the level of reporting. Indeed, the Revenue will be snowed under and yet another burden will have been placed on British business.
	The Government generally and the Paymaster General in Committee specifically referred to schemes, and the understanding of the population at large is that the target of the new disclosure regime is widely marketed tax avoidance schemes. However, the current drafting is such that the schemes will operate much more widely than should be intended, and uncertainty and additional compliance burdens will be created.
	New clause 7 is designed to clarify and confirm the focus of the new rules on the marketing of avoidance schemes—hence the crucial dividing line between reportable schemes and non-reportable everyday bespoke tax advice. In Committee debates, I said that I hoped that the arrangements were intended to apply to promoters of schemes and not, for example, to tax advice in the normal course of business or to takeover activities, which always require tax advice.
	The direct tax disclosure proposals as they stand have been changed marginally as a result of the Government's amendments, and the regulations to implement the rules framework will be amended further in the light of the Paymaster General's recent press release. However, what remain are legislation and a set of rules that still have an uncertain reach—and uncertainty is not what a tax system should be based on. Accountants want to comply with the rules but, as currently drafted, the rules are bound to lead to excessive disclosure, which would be counter-productive for the Inland Revenue as well as for commerce.
	The new clause is thus designed to ensure greater certainty in the application of the rules to everyday client-adviser situations and to bespoke advice coming from continuing and continuous business arrangements. As I have already explained, when it comes to takeovers, it is inevitable that commercial arrangements will change rapidly and frequently as the deal is worked on. A tax input is necessary and a tax can be either a cost or a benefit of the deal, which is factored into the price. The advice will be normal everyday tax planning advice designed to ensure that those involved understand the tax consequences of what they have in mind and that they take advantage of the basic rights of taxpayers to minimise their tax liabilities within the law. It is crucial to get rid of uncertainty; otherwise, advisers, their clients and the Inland Revenue will waste a lot of time over disclosures that surely are not required. That will help no one, least of all the Revenue.
	It is notable that the House of Lords Select Committee on Economic Affairs made exactly those points about the Government's proposals. It stated that it was
	"not convinced that the legislation as it stands has been sufficiently thought through or exposed for serious consultation with those who will have to deal with its consequences . . . We have seen the good results which such consultation has produced in the case of the Government's measures to simplify the taxation of pensions. We would like to have seen something along the same lines for some at least of the revenue protection measures."
	In its conclusions, the Committee stated that
	"there is a need to avoid the risk of over-reporting to ensure that taxpayers and their advisers do not report ordinary tax planning arrangements . . . We have sympathy with the view expressed to us that the primary legislation and the regulations ought to be worded sufficiently tightly to put matters beyond doubt and that the function of departmental guidance is to elucidate rather than to make"
	secondary market rules.
	I hope that the Paymaster General will tell the House that it is her intent that the winnowing process of the regulations and, ultimately, the Revenue guidance will mean that marketed tax avoidance schemes are reported. However, tax law should not be run by Revenue fiat: it is wrong in principle that a law, as drafted, should not be clear.
	The five-day time limit has been debated previously. It is obvious that there is no problem in reporting within five days avoidance schemes that are being marketed, and it is equally obvious that it is entirely impractical for the general run of tax advice to be reported in the same period. Moreover, the latter is a continuing process.
	In addition, will the Paymaster General give an assurance that the voluntary sector will be excluded from the scope of the regulations? A growing number of charities and similar organisations offer advice on tax or tax credits to people on low incomes, on a pro-bono basis. The advice given by such bodies is not generally of the sort that would constitute avoidance schemes, but it is a way to help people to make the best of their opportunities. It often consists of simple advice to help a couple to structure their tax position to their best advantage.
	The draft regulations focus on avoidance schemes rather than ordinary tax planning, and the draft guidance notes give some comfort. However, the difference at issue is the same as that between the business and marketing of tax avoidance schemes and the general giving of taxation advice in the normal run of tax planning.
	We must have a clear dividing line in these matters. It is one of the major outstanding issues for the legal and accounting professions, and for much of business. If we do not get a clear dividing line, there will be huge problems for the Inland Revenue, and business will be faced with quite unnecessary compliance burdens.
	I hope that the Paymaster General will be able to assure us that she has eventually made up her mind about the dividing line. If she has not, we will press the amendment on this major issue to a vote.

David Laws: I want to speak to amendments Nos. 39, 40 and 42. To some extent, I echo the comments of the hon. Member for Arundel and South Downs (Mr. Flight). One advantage for us in our review of this year's Finance Bill is that we have been able to study the report from the House of Lords Select Committee on Economic Affairs, to which the hon. Gentleman referred. It goes into some detail on some prominent aspects of the Bill, especially those that have been controversial with businesses and tax practitioners. Having served on the Treasury Committee, I am not convinced that it has been able in the past to give enough attention to specific tax measures, as opposed to the macro-economic impact of Budgets. Therefore, it has not been able to inform the debates that we have in this place, especially by taking evidence from outside bodies. For that reason, I welcome the fact that the House of Lords Committee has again prepared a report on the Finance Bill and I hope that we shall be able to learn from some of its assessments, often made by people with much expertise in the area who have considered the issues in a non-party political and non-partisan way.
	The House of Lords Committee's report echoes to a large extent the support in this place and outside for the broad thrust of the Government's proposals on tax avoidance, especially the early notification of tax avoidance schemes and, in particular, those that are widely marketed. In paragraph 19 on page 15, the Committee states:
	"We wholeheartedly support the objectives of this draft legislation when applied to contrived schemes of artificial avoidance, and we have focused on matters that might assist in its practical application."
	The Committee goes on to distinguish—as have our debates today—the artificial contrived schemes, which are marketed to large numbers of counterparties, from the bespoke schemes, of which there are many more.

Dawn Primarolo: Will the hon. Gentleman explain to the House the difference between a bespoke scheme that saves one taxpayer £300 million that they should have paid, and a marketed scheme that is sold to hundreds of thousands and also costs the Exchequer £300 million? Both involve a tax loss through avoidance, and that is what we should deal with.

David Laws: I agree with the Paymaster General about the potential tax loss. However, we need to distinguish between the two types of tax planning activity—schemes that are widely marketed, about which the Inland Revenue can be contacted and the schemes registered, and the more detailed tax advice that most tax accountants would not even consider constituted a scheme. Such tax advice may also be provided by a number of different entities within one group at the same time, and the practical steps that would have to be taken to report that information to the Inland Revenue could cause problems.

Dawn Primarolo: I must press the hon. Gentleman on the issue, because he did not answer my question. If bespoke advice to one taxpayer saves them £300 million through avoidance that they should not have saved, why should not that bespoke scheme be notified to the Revenue?

David Laws: In terms of the practical application and the compliance cost, there is a material difference between artificial schemes that can be reported and cover tax advice given to many entities at the same time, and tax advice that is given to individual companies when dealing with their day-to-day affairs and which even the Paymaster General might agree did not constitute a "scheme".

Dawn Primarolo: In that case, does the hon. Gentleman accept that those highly paid, highly qualified and intelligent tax advisers and accountants know full well that the advice they give will be used to avoid tax when it should not be avoided? Therefore, they would know the difference between a bespoke tax avoidance scheme and a bespoke tax planning scheme that would be within the rules.

David Laws: I do not want to disappoint the Paymaster General, but I genuinely do not believe that it is quite that simple. Like most tax practitioners, I think there is a spectrum—from actively marketed contrived schemes to advice given by tax practitioners in the ordinary course of events.
	Our amendments address two practical issues that are dealt with in the House of Lords report. The first is whether there should be a requirement for a different reporting period for individual pieces of tax advice—perhaps the Paymaster General would prefer me to call them that rather than bespoke schemes, which carries the sense that they are indeed schemes—in contrast to that for the artificial and marketed schemes. The second issue is whether there should be a de minimis limit in order to reduce compliance costs.
	Despite the Paymaster General's comments in Committee and in this debate, she has failed to convince not only many professional bodies and individual accountancy firms, which may worry her rather less, but a cross-party House of Lords Committee that has given the issue careful deliberation, no doubt bearing in mind the points that she has made. As the hon. Member for Arundel and South Downs noted earlier, the Committee's conclusion was that although it accepted the proposition that five days was long enough for "pre-packaged schemes", it had sympathy for the view that there were likely to be more complex commercial relationships where
	"five days is too short a period in which to determine whether or not a report is due".
	The Committee noted that, given its focus on ease of administration in keeping down the compliance costs of both sides:
	"We recommend that consideration be given to adopting a 30-day time limit in respect of notifications under clauses 292 (1) and (3) of the Finance Bill".
	The Committee also referred to the evidence given by John Whiting of PricewaterhouseCoopers. He commented:
	"It is noticeable that the Inland Revenue, whilst requiring disclosure in five days"—
	in relation to this type of tax advice—
	"is then allowed 30 days to simply register the item and return with a number for the scheme."
	The practical implications of such deadlines for that type of tax advice were set out in a letter from Grant Thornton, the tax accountants, which I am sure that the Paymaster General has seen and which describes from Grant Thornton's perspective some of the practicalities in reporting that information and how it intends to handle the process, highlighting some of the steps it will need to take. Grant Thornton's evidence makes it clear that the marketed schemes are not an issue; the material for such schemes should be at hand and there should be no difficulty in notification. The letter states:
	"Grant Thornton intends to make notifications"—
	of the individual advice—
	"on a centralised basis. This should be of benefit to the Inland Revenue as it should avoid duplication and our submissions should be consistent in nature. However, with offices in 34 locations, the gathering, filtering, collation and summarisation of information within the five-day timescale will be virtually impossible to achieve. If we make each office responsible for its own notifications, then the Inland Revenue's Avoidance Intelligence Unit could potentially be swamped with duplicated notifications. A timescale of 30 days would be more realistic and would be in line with many other time limits for providing information".
	When we consider how such information is likely to be reported and filtered in practice, we can see that a five-day deadline would be a rapid turnaround. If the Government insist on keeping to that deadline, they may receive information in much greater quantities, much less effectively filtered and from a number of different locations.
	I understand the Paymaster General's concern about extending the notification period, thus providing an opportunity for tax avoidance. I hope that she will appreciate that that concern must be balanced by an understanding of the practicalities that many tax accountants will face in the circumstances and that, therefore, she will at least reflect on the deliberations of the House of Lords Committee even if she considers that tax practitioners have a commercial interest in amending the legislation in this way.
	The second issue that I want to touch on is whether a de minimis threshold should be established. The House of Lords Committee discussed that issue and put it to the Inland Revenue officials who gave evidence to it. At paragraph 41, it says:
	"The Revenue had practical objections to both the suggested measures for a de minimis rule"
	in respect of the possible tax avoidance or the fees that would be charged. It says that the Inland Revenue
	"anticipated that promoters 'might argue that they would not know with any certainty how much tax was at stake when their scheme was used by a particular taxpayer.' A fees-based test was ruled out because 'it would not be straightforward to isolate fees for a particular tax scheme from fees for general tax advice'."
	I do not want to go into too much detail, as it is already outlined in the House of Lords Economic Affairs Committee report, but that Committee has also had the benefit, which we have not, of taking evidence from the United States Internal Revenue Service and hearing about its experience of early declaration and notification and using a de minimis rule. The House of Lords Committee points out that three of the five filters used for notification in the US include a de minimis element. At paragraph 48, on the basis of its deliberations about how such matters work in the United States of America, it rejects the idea that a de minimis limit would be unworkable. Indeed, it says:
	"We accept the argument that setting a de minimis threshold could serve significantly to reduce compliance costs and, in the light of the US IRS evidence to us, we therefore recommend that further consideration be given to adopting a de minimis limit for the reporting of individual schemes."
	Both those matters are not straightforward for the Treasury and concerns have been raised about whether tax avoidance could occur while individual tax measures are being reported, but I hope that the Paymaster General will accept that countervailing concerns have been expressed about the burdens that could be imposed and about requiring a short reporting period for detailed tax advice while the Inland Revenue appears to allow itself much longer to respond to its counterparties. If the Paymaster General is unable to respond constructively to the House of Lords Committee's proposals, I hope that she will at least indicate that she will keep the matter closely under review in the year ahead and that, if it turns out that adopting those proposals has benefits, she will be willing to keep an open mind and introduce changes at a later stage.

Dawn Primarolo: Perhaps I should start with the point about artificial versus bespoke schemes made by the hon. Members for Yeovil (Mr. Laws) and for Arundel and South Downs (Mr. Flight). The purpose of the disclosure clauses is to address the precise issues highlighted by the hon. Member for Yeovil—the artificial and contrived arrangements that can occur in marketed schemes and bespoke arrangements. Neither the Government nor any hon. Member have advanced an argument to say that normal tax planning should fall within the disclosure rules; on the contrary, the Government argue that normal tax planning should not fall within the bespoke rules. Frankly, I would say to the hon. Member for Yeovil that if organisations such as Grant Thornton cannot tell the difference between an artificial and contrived arrangement and normal tax planning, I would be amazed. Indeed, I might thus seriously question the quality of advice that it gives to people who pay a lot of money for that service.

David Laws: Does the Paymaster General accept that not only Grant Thornton but all tax practitioners have expressed considerable concern about what they will be required to report and what they will not? Although it might be easy to distinguish between each end of the spectrum, it is more difficult to decide whether tax advice that falls in the middle of the spectrum constitutes something that the Government intend to be reported.

Dawn Primarolo: With respect to the hon. Gentleman—and I shall address that issue later—he did not advance that scenario when he cited Grant Thornton. If he was quoting correctly, it sounded as though the company would send the Inland Revenue just about all the tax advice produced by every office in the country. I refer him back to the excellent speech made on Second Reading by the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb), although I shall not repeat it. That was the best speech that I have heard about corporate responsibility, and it demonstrated clearly the fact that professionals should know full well the precise activities that they undertake.
	I want to address further issues regarding new clause 7 and amendments Nos. 39, 40 and 42, but I make it absolutely clear again that we are talking about artificial and contrived schemes, such as gilt strips and those that we addressed when we considered new clauses 9 and 10 today. We want to get information so that we can deal with such schemes in the way in which all hon. Members have implored Ministers to do.

Quentin Davies: As the Paymaster General says, everything turns on the words "artificial" and "contrived", because they determine whether something is notifiable. Does she agree that those terms are ambiguous because they involve an element of judgment—they are not mathematically precise? An adviser will need to know, ex ante, whether a scheme is artificial and contrived because it is no use waiting for a court to determine that. By that time, an adviser might have made a mistake and thus have been penalised. Will the Paymaster General give the House definitions of "artificial" and "contrived" to make their meanings unambiguously clear? If we use words that require an element of judgment, there will be, by definition, a large area of persistent doubt, and thus unfairness and perversity may arise.

Dawn Primarolo: That was a long intervention. As the hon. Gentleman knows, the clauses and the filters in the regulations seek to make the position clear. We are talking about the operation of the provisions in only two areas of taxation—employment and financial products. He should cast his mind back to discussions on new clause 9, when we learned that tax planners have already designed a scheme to get round clause 134, even though the Bill has yet to receive Royal Assent. We were fortunate to receive the details of the scheme so that the House could close it off. If I explain how the relevant provisions will work in practice, the hon. Gentleman may not be satisfied but he will have a clearer understanding of them. By their very nature, artificial and contrived schemes introduce uncertainty into the system. I fail to understand how anybody could look at, for instance, the gilt strip arrangements and not conclude that they are contrived. I am trying to deal with those grey areas.

Howard Flight: Is there not a clear moral distinction to be made? The individuals to whom the right hon. Lady referred know when they are dealing in artificially contrived schemes, as opposed to tax planning to minimise tax liabilities. Legally, it is difficult to distinguish between the two, although the regulations may go some way towards doing so. The Bill, however, does not.

Dawn Primarolo: I am not even going to attempt to go down the road of moral definitions.
	There has been a universal welcome for the Bill's attempt to provide disclosure mechanisms in the light of the experience of the US and other countries. Tax avoidance is not limited to marketed schemes or even schemes that are sold without marketing, which is why the Government's approach is to target arrangements where the risk of avoidance is greatest. New clause 7 would give rise to significant practical problems, as I shall explain to the House, and does not address or improve the position that hon. Gentlemen are trying to tackle. I accept that it attempts to differentiate between an off-the-shelf scheme and bespoke advice, but applying the disclosure rules only where a promoter sells or markets a scheme could create the very uncertainty and arbitrary boundaries that they seek to remove. That problem arises from the very nature of contrived and artificial schemes.
	There is a genuine difficulty, I acknowledge, in drawing a clear line between advice on marketed schemes, such as the gilt strip scheme that the Government have dealt with in the Bill, and planning advice—advice on a major commercial transaction such as an acquisition or merger, however, is clearly bespoke advice—and hon. Gentlemen are seeking to address that grey area. It is not clear on which side of the dividing line between bespoke advice and advice on marketed or off-the-shelf schemes particular advice will fall. Trying to target the disclosure rules in that way would make it even harder for the majority of compliant advisers to apply them and, at the same time, would unfortunately—I know that this is not the hon. Gentlemen's intention—provide scope for less scrupulous advisers to find ways of side-stepping them. That would create a significant defect in the disclosure rules. That is why the Government's approach is to target the types of schemes and arrangements in which we believe that avoidance is most prevalent.
	It is not clear how the new clause is intended to affect the disclosure of schemes devised in-house, and there are many such schemes. The result of the new clause could be the introduction of different rules for the disclosure of schemes that are marketed and sold by a promoter, and in-house schemes where no promoter is involved. Were the Government to adopt that approach, they would rightly be open to accusations of discrimination against firms that rely on in-house tax advice.
	Notwithstanding some of the comments that have been made, the Inland Revenue has had extensive consultation with the profession and the industry on the draft regulations and has set out details of what would be caught by the disclosure rules. During the consultation, concern was expressed that the financial products regulations might be too wide. I recognise that the new clause attempts to deal with those concerns by narrowing the scope of the rules for marketed and off-the-shelf schemes.
	I appreciate that the hon. Gentleman also wants to ensure that the disclosure rules do not apply to the normal tax planning advice on commercial transactions that is provided by the vast majority of tax advisers. He wants to distinguish between that sort of bespoke advice and aggressive schemes that depend on exploiting loopholes. I can assure him that the Government do not want to impinge on straightforward tax planning. That is not what we are attempting to do. However, our concern remains—I made the point in Committee as well—that some bespoke advice also depends on the aggressive exploitation of loopholes.
	We therefore believe that the response that the Government propose is more effective and will preserve the new disclosure obligations. The Inland Revenue is working hard with tax advisers to ensure that the rules catch only aggressive schemes. We will refine the text of the regulations to ensure that the financial products test is clear and easier to apply in practice. The regulations will contain new filters, which we discussed in Committee. They will ensure that financial products that gain a tax advantage by exploiting loopholes are dealt with.
	Government amendment No. 222 corrects a drafting error. It removes from clause 299 some extraneous words referring to a trade, profession or business that involves the provision to other persons of services relating to taxation.
	Amendments Nos. 39 and 40 seek to remove from the Board of Inland Revenue the power to prescribe in regulations the time within which promoters are required to make a disclosure, and set out in primary legislation that that should be 30 days. I make a simple point to the hon. Member for Yeovil: when the promoters make the scheme available for use, they know whether or not it should be declared. Five days after the scheme is made available is therefore reasonable. Thirty days simply allows more time.
	The broad framework for a disclosure regime is set out in primary legislation and specifies who needs to make a disclosure and what they need to disclose. The regulations published in May require promoters to supply those details within five days. If they know on day 1, day 2, day 3, day 4, day 5, day 29 and day 30, I do not see why they cannot make the information available by day 5 and why that should wait until day 30. I am not convinced that the promoters cannot supply the information within five days. They clearly have all the information that they need, because they make the schemes available.

David Laws: Can the Paymaster General confirm that, like the House of Lords Economic Affairs Committee report, our proposal distinguishes between artificial marketed schemes, where we agree that the five-day limit is right, and more complex tax advice, where a potential problem exists and a 30-day limit might, as the House of Lords Committee suggested, be more sensible?

Dawn Primarolo: Amendments Nos. 39 and 40 do not provide for that distinction, because they remove the five-day period. The operation of the disclosure rules means that the Government's arrangements are straightforward, and there is no reason why they should not work.
	Amendment No. 42 gives the Treasury a new statutory power to impose a de minimis limit. It is difficult to see what it seeks to achieve, because it does not set the de minimis threshold, but merely enables the Treasury and the Inland Revenue to introduce such a limit. We resist the introduction of a de minimis limit for direct tax disclosure rules because it would not work in practice. For example, where such a limit applied to tax saved or to the turnover of a business, a promoter of a scheme might not be in a position to know those facts when they sold the scheme to the client, and would not know whether the de minimis limit applied and whether they should make a declaration. The disclosure rules in the Bill provide for the notification of the Government and the Inland Revenue when promoters and those giving advice believe that schemes fall within the definition of "artificial and contrived", which is vital if we are to defend tax revenues in order to invest in our public services.

Quentin Davies: The Paymaster General said that my intervention, which she was kind enough to take, was too long, so I rise to take her up on one or two points. This afternoon's debate has become quite amusing, because she used an argument that she herself dismissed earlier in the debate to reject new clause 7. She says that one cannot make a viable distinction between a marketed scheme and a non-marketed scheme, because one cannot define what is marketed, so, in her words, "a grey area" exists between marketed and non-marketed schemes. Conservative Members have put that argument to her on the definition of "artificial and contrived", and a considerable grey area clearly exists.
	The Paymaster General says that everyone knows what is "artificial and contrived", but I shall give her an example and take an intervention, if she wants to make one. What about transferring capital allowances from profit-earning firms to non-profit-earning firms through finance leases? That mechanism is classic, but surely it is "artificial and contrived." It must be contrived—presumably some clever tax accountant or lawyer thought it up 20 years ago when finance leases started—and it became a classic method of financing. It enabled companies whose profitability was not sufficient to do so to get full benefit from capital allowances by investing in plant and equipment, which is a socially and economically desirable objective that both Conservative and Labour Governments have sought to secure.
	The Paymaster General has not intervened yet, but does she regard that example as "artificial and contrived"? The practice certainly did not flow directly from the original purpose of the capital allowances, which were effectively used by firms that were not making the corresponding profits, so one could describe that as both artificial and contrived. The right hon. Lady clearly does not know the answer.
	Earlier this afternoon, the Government moved new clauses 9 and 10, which we did not oppose and which are designed to prevent from coming into effect artificial and contrived tax avoidance schemes that, we were told, have been marketed over the past few weeks. But she did not rely on her "artificial and contrived" definition to try to dispose of those particular schemes: she used the different mechanism of an anti-avoidance rule. Why does she not stick with that? Why does she not simply say that schemes will be disregarded by the Revenue if their main purpose is to avoid tax, as under new clause 10? That is a much more objective definition than "artificial and contrived".
	The right hon. Lady cannot pray in aid new clause 10 because she adopted an entirely different approach to solving the problem of that set of schemes. She certainly cannot reject the argument that it is undesirable to have areas of doubt and uncertainty—grey areas—in tax legislation when they are put to her in one context, then five minutes later reject an Opposition amendment on precisely the same ground. There is a certain amount of irony, to put it kindly, in the position that the Government have taken up this afternoon.

Dawn Primarolo: The only irony is that the hon. Gentleman has not read the proceedings of the Standing Committee, during which I specifically gave the answer with regard to leasing and the disclosure rule.

Quentin Davies: The right hon. Lady did not then, or on any other occasion, define "artificial and contrived". I cited the lease as an example where doubt would exist ex ante as to whether it was artificial and contrived. She may well be able subsequently to say that she chooses not to regard it as artificial and contrived, yet it could have been considered to be so.
	I am afraid that the right hon. Lady has not answered the question at all. We need a definition ex ante; otherwise, the only way in which we will get a definition is ex post, after a great deal of complicated and expensive litigation before the commissioners or the courts. What is more, as my hon. Friend the Member for Arundel and South Downs (Mr. Flight) said, it is inevitable that tax advisers will play safe. The e-mails and pieces of paper that travel between tax advisers and Revenue offices will increase greatly as everybody tries to cover themselves in knowledge of the penalties that will apply if it is subsequently, and retrospectively, deemed that a certain piece of tax advice was involved in an artificial or contrived arrangement.
	The right hon. Lady may live to regret this. I am afraid that by not giving us any guidance on what is artificial contrivance, and accepting a grey area in these matters that she rejects elsewhere, she has laid the basis for the problem that I fear will ensue.

Howard Flight: All hon. Members will understand what the Paymaster General is trying to achieve and why. Our concerns, as echoed by my hon. Friend the Member for Grantham and Stamford (Mr. Davies), centre on why the arrangements as they stand can achieve it without leaving too great a grey territory in the middle. We have a lot to learn from the US experience in this area, and I trust that the right hon. Lady will continue to monitor that.
	Morally, everyone knows when they are crossing the line between acceptable tax planning and artificial contrivance, but legally defining that is extremely difficult. For good reason, the Minister does not want a definition of artificial and contrived schemes in law. Only a few years ago, inspectors of taxes were telling people that trust arrangements were not caught by the gifts with reservation rules and were perfectly okay and acceptable, whereas now they are seen as artificial contrivances. Judgments as to where the line is drawn change over time.
	We believe that the most important place to start in this regard must be with practical measures that will have some effect. That is why it is important to draw the line in relation to any form of promotion and selling; that is where we shall stop most of the problems, because that is where most of the abuse has taken place. We understand the Minister's point that a clever company could come up with its own fancy internal scheme. We do not deny that that could be a problem, and we understand why the Government are trying to catch that kind of problem. However, our concern is that the price of doing that will be a degree of mayhem in terms of how the financial industry and accountants operate, and in terms of what the Revenue gets landed with.
	I am afraid that, although the Minister has convinced us of the worthiness of her intentions, she has not convinced us that she has addressed the problem of the grey territory in the middle. If that is not addressed, the arrangements will be damaging to the economy. For that reason of principle, we would like to register our point by pressing the matter to a vote.

Question put, That the clause be read a Second time:—
	The House divided: Ayes 128, Noes 268.

Question accordingly negatived.

Clause 4
	 — 
	Duty stamps for spirits etc

David Laws: I beg to move amendment No. 35, in page 3, line 11, leave out clause 4.

Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 41, in page 265, line 2, leave out schedule 1.
	Government amendments Nos. 50 to 70.

David Laws: The previous time we debated this issue in detail was on 27 April on the Floor of the House. The debate lasted some four hours, which was more than 50 per cent. of the deliberations. I hope that the debate today will be somewhat shorter, although, with the number of hon. Members from Scottish constituencies here, that is not guaranteed.
	It was appropriate that we had a detailed debate about the issue, because it has caused much concern in the spirits industry in the United Kingdom, across all parties. I do not intend to go over all the ground that we covered on 27 April because that has already been written into the record, but it is worth reminding the House of the conclusion of the all-party Select Committee on Scottish Affairs, which reported prior to the debate in April. It concluded:
	"Until definitive figures are available"
	on the extent of fraud in the spirits industry,
	"no estimate, whether from Customs or from the industry, can be accepted as accurate. For any Government to introduce important measures which could have major implications for industry and employment, based on what could be inaccurate figures, might be considered precipitate to the point of being reckless."
	Since that debate, there have been two developments that are relevant to our discussions. The first is that the Lords Select Committee on Economic Affairs has had an opportunity to debate the issue in detail and to take evidence from the industry and others about the potential implications of the measures that the Government intend to take. Secondly, amendments have been tabled by the Government. Perhaps you, Mr. Deputy Speaker, will allow me to turn to the Government amendments first because, to the extent that they address this particular issue and concern, they will limit the rest of the debate, particularly the debate about the different estimates of the extent of the fraud in the sector and the cost that will fall on the spirits industry and particularly smaller producers as a consequence of the measures that the Government envisage.
	We have already had some feedback from one of the major industries that will be affected by the measure and by the amendments that the Government have tabled in the past few days. In an e-mail on 5 July to my hon. Friend the Member for Argyll and Bute (Mr. Reid), who has been particularly active in lobbying on the issue alongside many other Scottish MPs from all political parties, the Scotch Whisky Association set out its view about the Government amendments. It says that in the first instance, contrary to some weekend newspaper reports, largely in the Scottish media, the amendments do not mean that the Chancellor is abandoning strip stamps either in principle or in terms of the conclusion that the Government have so far reached. It goes on to say that the amendments are positive in that they allow the industry and the Government to continue discussions about whether an alternative route to a piece of paper over the top of the bottle can be found and that this "might"—it underlines "might"—in the type B variant include a tax stamp appearing within the back label of a bottle, for example, or even under the type A proposal, the ability to attach a self-adhesive label somewhere on the bottle. The SWA goes on to say that such a solution would incur expenditure on the redesign of labels, but that that would be minor compared with companies having to buy strip stamp application machines, which was the Government's previous proposal. The SWA's assessment is that the amendments offer an important opportunity for ongoing discussions to take place against legislation that gives the chance of flexibility in design of the final tax stamp scheme. However, it points out that it has received no concrete assurance that the original preference will not in fact be the one that we end up with. It says that we need to satisfy Customs and Excise over the security aspects of the alternative and ensure that there is sufficiently broad support across the industry.
	However, this is certainly a step in the right direction, and I welcome the fact that the Economic Secretary and his colleagues have had detailed discussions with the industry on reducing compliance costs, and on the principle of the scheme. My colleagues and I certainly will not oppose the Government amendments tabled today. If they are accepted, the compliance burden on the industry will potentially be significantly less than it would otherwise be.
	That said, we have tabled a couple of amendments that would delete clause 4 and the associated schedule. We continue to table such amendments, and currently intend to vote on them, because we are still unconvinced that the Government have proven the case for introducing proposals of any kind.
	Alongside the Government's proposals, which are a small step in the right direction, there has been another major development since we debated this issue in April: the assessment by the Lords Select Committee on Economic Affairs of various key aspects of the Finance Bill. It is a cross-party Committee, and in reporting on this matter it has come up with some clear—and very critical—conclusions. One of my colleagues on that Committee told me the other day that he considered this the most deficient aspect of the Finance Bill, and that the Committee was perhaps more concerned about the estimate of fraud than about any of the other salient elements of the Bill that they looked at in detail.

John Lyons: The hon. Gentleman should consider the fact that the argument has moved on somewhat, as his earlier comments about the SWA e-mail underlined. The Scottish Affairs Committee, among others, was deeply concerned that because the stamp is designed to go over the top of the bottle, the costs for distilleries such as Bushmills would be rather high. So we were happy that the SWA endorsed a flexible approach, and that the Government were able to discuss with it an alternative to placing the stamp over the top of the bottle.

David Laws: I am grateful to the hon. Gentleman for that intervention, which highlights where the debate is now. It is clear that the measures proposed in the Government amendments are a clear step forward. They have the potential to reduce the compliance burden associated with the measures that the Government are seeking to implement, but they still leave the SWA, the spirits industry and ourselves with an underlying worry about whether the Government have justified introducing this additional burden at all.
	I remind the hon. Member for Strathkelvin and Bearsden (Mr. Lyons) of the Scottish Affairs Committee's conclusion, and underline the quotation that I referred to earlier:
	"Until the definitive figures are available, no estimate, whether from Customs or from industry, can be accepted."
	The hon. Gentleman will recollect that the Committee continued:
	"Introducing changes of any kind would be considered precipitate to the point of being reckless, without actually understanding the extent of the fraud and getting some greater agreement over the figures."
	The Lords Select Committee on Economic Affairs discussed the fact that Customs and Excise and the industry have given various estimates of the extent of fraud, and it discussed the National Audit Office assessment of those estimates. It refers to the fact that the potential variation in the estimate of fraud is between £10 million at the bottom end and £1,060 million at the top end, a huge amount. I do not know whether the hon. Gentleman has had a chance to see the report from the House of Lords Economic Affairs Committee, but it would be useful for him to do so.

Malcolm Bruce: Does my hon. Friend agree that we have to put this into context? I have 12 distilleries in my constituency, and the spirits industry makes a huge contribution to the economy and is our major export. Yet the Government seem to be obsessed with a fraud they cannot prove and a mechanism that would affect the industry's competitiveness. We are the leading marketeer of branded spirits in the world. Is it really necessary for the Government to impose this kind of extra cost on the industry unless they can justify it in terms of fraud? The figures quoted by my hon. Friend show that the parameters are ridiculous.

David Laws: My hon. Friend is right. Although the Scotch Whisky Association and the spirits industry may prefer the Government amendments to the original proposals, that does not mean that they support even the amended proposals on the basis of the available evidence. The House of Lords Economic Affairs Committee concluded:
	"While we accept that estimates of the scale of fraud are always uncertain, we are concerned by the extent of the differences in the estimates between those of the industry and those of the Government. Clearly the question whether the compliance costs of duty stamps represent a reasonable burden depends in part on the extent of the fraud. In this context we are particularly disturbed at the size of the statistical range in the Government's own figures, and have some sympathy for the view urged on us by the industry that uncertainty over the measure of the fraud means that a necessary pre-condition for the introduction of so burdensome a measure has not been met."
	The Committee added that there was an urgent need for additional work to establish whether the cost estimates of the Exchequer were reliable, adding that it would be dangerous to introduce the additional potential costs without a clear understanding of the extent of fraud and, therefore, the extent of the benefit.
	The House of Lords Economic Affairs Committee raised a number of important points that we discussed on 27 April; important issues but, compared with the overall issue of the amount of fraud, second-order issues. One is the question of the counterfeiting of tax stamps, about which representatives from Customs and Excise gave evidence to the House of Lords Committee. After considerable debate and consideration, the Committee concluded:
	"We note the confident note struck by HMCE in respect of the risks of counterfeiting and that this reflected the reassuring tone of the Economic Secretary's response to the Scottish Affairs Committee, who, however, felt such a response to be verging on the complacent. Counterfeiting of stamps could in the event add to the overall burden of costs of the measure, and in this instance too, it is difficult to evaluate against the background of uncertainty over the measure of spirits diversion fraud."
	In other words, the House of Lords Committee was not persuaded by the case that the Government were making on counterfeiting.
	There are other points on which we would like clarification from the Economic Secretary. In particular, we need an update on the discussions taking place with the industry and the extent of progress in agreeing steps to reduce the compliance burden. The Economic Secretary said that he hoped that smaller producers—who might be particularly hard hit by the measure—would introduce some targeted measures to reduce the costs.
	There has been some discussion about the cost of the stamps being borne entirely by the Government rather than falling upon the industry. I understand that there is scope within the Bill for debate about whether that will happen. I hope that the Economic Secretary will make it clear today that all of the cost of the stamps will be borne by the Government.
	I hope that I have not been too ungenerous to the Economic Secretary, who has made some progress since we debated the issue about a month ago. He is bringing forward measures that address some of the concerns of the industry and therefore we will not oppose the amendments that he has tabled today. However, the big issue that remains, as identified by the House of Lords Economic Affairs Committee and in the Scottish Affairs Committee report, is what is a reasonable estimate of fraud in this sector. Is there not a real risk of introducing measures, in either their amended or original form, which will impose costs on the industry that are much more significant than the benefits that we could potentially secure?

John Healey: I rise to explain the Government amendments in the group, but I welcome their approval by the hon. Member for Yeovil (Mr. Laws) and I hope to give him the progress report that he seeks. He said that he did not want to go over the ground covered by the Committee of the whole House on 27 April, but his amendments are drafted in such a way that other hon. Members may want to take advantage of them and go over those arguments, even though the debate was in a sense settled a couple of months ago.
	I hope that hon. Members will recall that, as the hon. Gentleman said, that debate lasted for nearly four hours. It was a debate in which 22 Members took part, with me playing my part by taking 49 minutes for my opening speech. Much to the displeasure of my colleagues in the Whips Office, I took 23 interventions, and a further 20 minutes responding to the points raised in the debate.

Alex Salmond: In remembering that debate, as I do, does the Economic Secretary recall how many of the 22 speeches made from both sides of the House were enthusiastically in favour of the Government's proposals?

John Healey: Even my own speech was not enthusiastically in favour of the Government's proposals. I made it very clear that it was a step that we did not wish to take, but that, having exhausted more than two years of work with the industry, we had come to the conclusion that there was simply no other way of trying to tackle the levels of fraud in the spirits sector. After the Committee of the whole House, the industry accepted that tax stamps were part of the Bill. It said afterwards that it would work with the Government to introduce the duty stamps—and it has. The Scotch Whisky Association said that the important thing was that the industry should be involved in detailed discussions with Customs and Excise and the Treasury to ensure that a workable regime was introduced. As my hon. Friend the Member for Strathkelvin and Bearsden (Mr. Lyons) has just said, the argument has moved on.
	In case hon. Members are not aware of it, let me explain that, soon after the Committee of the whole House debate a couple of months ago, the trade formally proposed to Customs the solution of back labels. The case was prepared well and some of the security features that we were keen to see incorporated in any tax stamp were examined. The Government amendments before us this evening are the result of the detailed and constructive work that has taken place during 16 separate meetings between the Government and the industry since the Committee of the whole House.
	During that debate on clause 4 and schedule 1, I emphasised the commitment made in the Budget that, while we would press ahead with the duty stamps regime, we would aim to ensure that the duty stamps were implemented in such a way that additional costs and complexity to the industry were minimised. I also welcomed in that debate the report of the Scottish Affairs Committee, chaired by my hon. Friend the Member for Paisley, North (Mrs. Adams), and I committed the Government to give due consideration to the Scottish Affairs Committee's advice that
	"it would be far less disruptive to the industry for a tax stamp to be incorporated into the front or the back label of a bottle."

Malcolm Bruce: The Economic Secretary is explaining the justification for the Government amendments, but does he not acknowledge that the industry is trying to secure the least bad solution? The industry would prefer not to have any sort of requirement that would add costs, so the Economic Secretary is being rather disingenuous in suggesting that this is the industry's preferred solution. It is the least bad one, given that the Government want to press ahead.

John Healey: The hon. Gentleman needs to be a little patient. The industry has not let the Government forget that it would rather not have tax stamps. I make no bones about that but, since this matter was last discussed in the Committee of the whole House, the argument has changed. The industry has fulfilled its undertaking to work with us, and we have done much detailed and constructive work on the logistics of implementing the tax stamps regime. The introduction of the scheme is still 20 months away, and I look forward to the continuation of the consultation and the detailed discussion that we have had so far.

Irene Adams: The industry was well aware of the problems with whisky fraud. In two years, it took no steps to produce suggestions about how to tackle that fraud.

John Healey: My hon. Friend is right. She is Chair of the Scottish Affairs Committee, which pointed out the industry's lack of action in its report. The media did not give that element of the report much attention, but it was a central part of the Committee's analysis. It remains an important consideration.
	In the earlier debate, I warned that the back label approach might not deliver the degree of simplicity that we hoped for without compromising the regime's effectiveness in tackling fraud, or suffering some of the other flaws of conventional strip stamps. Over the past three months, however, representatives of Customs and the industry have met regularly to look at the details of implementing a duty stamp regime.
	As happened before the Budget, we have conducted consultations through the joint alcohol and tobacco consultative group. That industry forum is made up of representatives from producers, importers, retailers, travel retailers and warehouse keepers. Customs officials have worked with the JATCG's spirits group, and with two specially constituted specialist sub-groups looking at the detailed technical design of the tax stamp system, and at payments and compliance costs issues.
	Work has also continued, again in discussion with the industry through the JATCG, on the package of regulatory measures announced in last year's pre-Budget report. The measures complement the duty stamp system in clamping down on the opportunities for spirits fraud, and in helping to prevent the possible displacement of the fraud, from the spirits sector to other parts of the drinks industry.
	I pay tribute to the industry's approach to the work. It has never let us forget that it does not like tax stamps, but it has continued to emphasise its support for clamping down on fraud. Also, it has carried out its undertaking to work with us constructively to find a workable and effective duty stamps regime.
	The progress that has been made over the past three months means that I have been able to table these Government amendments, which will do two things. First, they will build into the legislation the flexibility that will allow us to adopt a system for incorporating duty stamps into the labels on the back of bottles of spirits, if that can be made to work. Secondly, and consequently, they will provide flexibility to enable arrangements for payment of duty stamps to reflect that decision on the duty stamps.
	I make it clear to the hon. Member for Yeovil thatthat does not affect the Government's commitment to bear the costs of printing and distributing tax stamps. If we decide to take the back label route, I do not think that the Government can be expected to pay for more than the duty stamp element of the back labels, as those labels serve much broader purposes for the industry, including product branding. However, I emphasise that the Government have not yet made a firm decision to go ahead with the back label system. Indeed, we are not yet in a position to make such a decision. There would be obvious concerns about the integrity and security of a duty stamps regime that permitted the full range of printers who currently supply labels to the UK spirits industry—and to those producers who supply to the UK market—to have access to the facilities that produced the tax stamps. However, it is at present uncertain whether any restrictions on the supply of labels would be compatible with EU law or World Trade Organisation rules. That is the issue that we need to examine further.

Alex Salmond: Given the unwillingness of the industry to accept strip stamps, given the uncertainty about the estimates that attempt to quantify the fraud, and given the new uncertainty that the Economic Secretary has spoken of—whether the proposal can be mitigated by the back label scheme—does he agree that we should not legislate on the issue? Everything he says suggests that the matter should still be at the discussion and formulation stage, not being considered during the Report stage of the Finance Bill.

John Healey: It is just three months since the Budget confirmation that we wanted to press ahead with tax stamps and 20 months until their implementation, and now is the time that we must put the legislative framework in place. That framework needs to allow sufficient flexibility for us to make decisions that we are not yet in a position to make.
	I do not believe that the SWA would press us for early decisions on the matter. If it had done so before, the early decision would have been to proceed with strip stamps, not back label stamps. We should consider the legislation now and build in the flexibility that we may need in the future.

John Robertson: I congratulate my hon. Friend on what he has said, but will he assure me and the whisky industry that his proposals are not just words to appease politicians and companies to stave off the fateful day, but a proper attempt to try to save the industry money and solve the problem of fraud? We want to see deeds, not words.

John Healey: I do not believe that my hon. Friend could have picked up any doubt on the part of the industry about the seriousness with which Customs staff, Treasury officials and I have entered into detailed discussions on several occasions since the Budget and the debate in Committee on the Floor of the House. Together with the trade, we have been able to establish the potential benefits of a back label system.

David Laws: I appreciate that the Economic Secretary does not believe that the proposals are yet ready to be approved, but can he tell us how long it will be before he decides whether the amendments that he has tabled today can be implemented or that he will need to revert to the original proposals? How many months will it be before we know?

John Healey: We are not in a position at this stage to make a decision. I hope that within two to three months we will be able to reach a firmer decision.

Mark Prisk: The amendments mention label type A and label type B as the two options available. Are those options mutually exclusive or would they run side by side?

John Healey: We have not made those decisions yet. The purpose of the amendments is to give us the flexibility to make those decisions in due course, when we are in a position to do so.
	My hon. Friends have been supportive of our efforts to find a workable solution for the introduction of the tax stamp regime and I am sure that they would be interested to hear about the conclusions that we have been able to reach about the potential benefits of back labels. I know that Labour Members who have played a big part in discussion of the issue on the Scottish Affairs Committee will certainly want to hear those conclusions.
	Let me make three things clear. First, we have been able to establish that, as the vast majority of spirits products already carry back labels, both the initial and the ongoing compliance costs of the option would be significantly less for the industry than strip stamps. In particular, the requirement for new machinery for the industry to apply stamps would be substantially reduced.
	Secondly, as duty stamps would in the vast majority of cases be incorporated in labels that already bore the product's brand name, a back label system could help to reduce the incentive for the counterfeiting and theft of duty stamps. Obviously, a potential fraudster would need to match a stolen or counterfeited stamp to something that could pass for the matching product. Thirdly, Customs is satisfied that a back label stamp could incorporate the full range of security and anti-counterfeiting measures that are vital for the prevention of stamp duty fraud.

Michael Weir: The Minister has rather skimmed over the discussions held with the industry about other aspects of fraud in the supply chain. When the Scottish Affairs Committee looked at that matter, it found that a key element was that fraud did not arise at the distillery but further down in the supply chain. Whether the Minister opts for a back label or an over-bottle strip stamp, he needs to explain how either would necessarily deal with that problem. Can he be more specific about that?

John Healey: To give the hon. Gentleman credit, he attended most of the debate on 27 April when we covered that issued comprehensively. As I have already made clear, alongside our detailed discussions with the industry about the potential for the use of back labels instead of strip stamps, we have been discussing compliance costs and how to reduce them, and looking into other regulations and measures that will help to deal with the sort of problems that he is concerned about.
	Our amendments are intended to create scope for the design of the stamp to be determined once we have made the fullest possible assessment of the relative merits of a strip stamp and a back label scheme and, most important, when we have clarified the legal position. I commend the amendments to the House.

Mark Prisk: The United Kingdom whisky and spirits industry is important for exports and for jobs. Scotch whisky exports alone are worth more than £2 billion a year, and many jobs in the industry are located in communities where there are few other employment opportunities.
	Throughout the passage of the Bill, the Government have told us that they want to impose tax stamps on spirits because they believe it is the only way to prevent fraud in the UK spirits market. The Opposition do not doubt that there is fraud. What is at question, however, is the scale of the fraud and whether strip stamps will deal with it without unduly harming the industry.
	That is why, throughout the Bill's proceedings, we have urged the Government not to press ahead with the scheme. It is an impractical policy, based on questionable statistics, and it has been rejected by many of our competitors, which is why we support the amendment moved by the hon. Member for Yeovil (Mr. Laws).
	The Government's briefing to Members of 18 March shows that, depending on the assumptions made, the fraud the scheme seeks to curtail could be as little as £10 million or as much as £1,080 million. In short, no one really knows the scale of the problem.
	We fully accept that there is a problem and that action is required. However, the very uncertainty about the nature of the problem means that it is even more important that the Government work closely with the industry. To that end, I note the 21 amendments that the Government have tabled. I also thank the Economic Secretary for his letter to my right hon. Friend the shadow Chancellor of 2 July, which indicates acceptance of many of the points that we raised in earlier exchanges, both on Second Reading and in Committee.
	The decision to respond positively to the suggestion that a duty stamp might be incorporated in existing product labels is to be welcomed. It could remove the danger, which we described, of small businesses having to buy expensive equipment simply to comply with Government regulations.
	I have discussed the decision with the Scotch Whisky Association, which, among others, speaks positively about it—although, frankly, like us, the association would prefer the whole scheme to be replaced with something more practical. However, the Government are not committed to such an amendment. For the benefit of hon. Members, I shall quote the Economic Secretary's letter to the shadow Chancellor, in which he states:
	"You should note that this does not mean that the Government will implement the industry proposal for a label mark. There are still a number of concerns over the label mark proposals, to which we need to give further detailed consideration with the industry and with Government lawyers."
	He then sets out some of those practical problems, including the danger that such a scheme could be open to scrutiny, as it might create barriers to trade. Indeed, that is a significant problem. I hope that he will give those matters due care, and his record suggests that he will. The industry has made it clear to me and many other hon. Members right from the beginning that, if handled badly, the scheme could make UK production in the whisky market less competitive. Of course, it has also stressed that there are important legal hurdles in a single market.
	When the Chancellor announced the scheme, he expressed a wish to hear alternatives. Despite what has been said earlier, the spirits industry has, in fact, suggested 17 alternative anti-fraud packages since then. In particular, the industry has based its approach on what, to be fair, in most other cases, the Government usually applaud—a risk-based strategy. By focusing on the higher risk movements, there would be a better chance of securing lost revenue, without unfairly burdening legitimate traders.
	I hope that in his reply the Minister will be able to set out what progress is being made. He has mentioned some of it, but I hope that he can elaborate further. In addition, of course, as we learned during the earlier consideration of the Bill, the Minister has already made a series of valuable concessions. The combined cost of the capital fund, the printing support and a two-year tax freeze is approximately £123 million. Given that the Government expect to claw back only about £160 million in lost revenue, the net gain seems remarkably small. Will the Minister say whether those figures have changed?
	The scheme remains, in our view, unduly onerous and based on uncertain evidence. We would rather that the Government listened to the industry before taking any further step. Despite the concessions that the Minister has made, to which he has referred, it remains our view that, on this scheme, in principle and in practice, it is time for the Government to think again.

Annabelle Ewing: I, too, rise to support amendments Nos. 35 and 41, tabled by the hon. Member for Yeovil (Mr. Laws). As we have heard, those amendments would delete clause 4, thereby scrapping the Government's proposed tax stamp scheme. Like many hon. Members—certainly those who represent constituencies in Scotland—I have a direct whisky interest in my constituency: the headquarters of the Edrington Group is based in Perth. I can also lay claim to the oldest, albeit the smallest, distillery in Scotland—the Glenturret distillery, just outside Crieff, which is also in my constituency.
	We have heard much about the importance of the Scotch whisky industry to the Scottish economy and that some 40,000 jobs are dependent on the industry throughout the length and breadth of Scotland. Indeed, it is one of Scotland's premier industries, so it is absolutely incredible that, notwithstanding all the uncertainties about the scheme, the UK Government still propose to go ahead with a damaging tax stamp scheme that has won no support outside the Treasury in London. I should have thought that the Government's role is to support our key industries, not actively to adopt measures that will damage them.
	As the debate has unfolded over the past months, we have heard pronouncement after pronouncement against the adoption of the scheme in principle at this time. All the key players have made those pronouncements, including the industry, the unions, the Scottish Parliament and the Select Committee on Scottish Affairs. Even Scotland's estimable First Minister expressed his disappointment that the UK Government would proceed.
	When I said a moment ago that the Treasury had no allies, I was perhaps not being 100 per cent. accurate because it has one ally—the Scottish Socialist party. It was the only party in the Scottish Parliament that failed to support a cross-party motion that called on the UK Government to reverse the damaging scheme. The fact that the Government have to rely on the support of the Trots says a lot about the unsoundness of their proposal.
	Why is there such united opposition in Scotland? The introduction of the tax stamp scheme is seen as damaging to the industry because the case on which it is based involves figures that have been criticised as unreliable. We have heard today about the House of Lords Economic Affairs Committee report and previously about the comments of the National Audit Office—the Economic Secretary is smiling about that for some reason. There has been no proper rigorous analysis of the likely effectiveness of the proposals. Indeed, the Economic Secretary admitted on Second Reading that the Government intended to go ahead with the tax stamp scheme despite the fact that no proper assessment had been made of the risk of counterfeiting. At the same time, however, the UK Government were quick to reject out of hand the industry's entirely reasonable alternative proposals.
	It is correct to say that Government amendments Nos. 50 to 70 offer the possibility of mitigating the significant cost of the scheme to the industry, but I would say no more than that, not least due to the lack of detail and the absence of any assurance from the Economic Secretary tonight about the back-label option. The fundamental point remains that the UK Government have not made an unarguable case for legislating for tax stamps in principle at this time. It is clear that tax stamps will cost the industry; the question is, "How much?"
	Amendment Nos. 35 and 41 represent one last opportunity to scrap the daft and damaging proposals, which is why my Scottish National party colleagues and I will support them. I urge Scottish Labour Members to consider doing the same because in a democratic society, surely the vote should follow the voice. For once, I would have thought it would be important for them to put the interests of their constituents and country ahead of those of the London Chancellor.

Alan Reid: It is quite clear that the case for tax stamps on bottles of spirits has not been made. Having said that, I am pleased that the Economic Secretary has held discussions with the spirits industry and tabled amendments that allow for the alternative option of incorporating the stamps on labels. I suggested in Committee that that option would not be as bad as the strip stamp proposal, so I am pleased that the amendments have been tabled.
	Although the alternative proposal of incorporating stamps on labels would be less costly for the industry, I am still firmly of the view that the case for tax stamps has not been made for other reasons. For example, the industry will still face the problems and cost involved in keeping the tax stamps secure, and it might yet be faced with the cost of buying the stamps up front.
	In response to the Scottish Affairs Committee report, the Government said that they were
	"seeking to implement tax stamps without requiring upfront payment for stamps".
	That sounded good, but they went on to say:
	"Realising this ambition is not straightforward".
	That wording is worrying. The Government want to pass the Bill without giving us any assurances that they will come up with a scheme for the deferred payment of duty. In fact, they may not be able to come up with a scheme for deferred payment of duty, which is extremely worryingly and reinforces the argument that it is premature to pass legislation today to introduce a tax stamp scheme.
	Despite all the spin in the press over the weekend, and even though they have undertaken to consider the label stamp alternative, the Government have not abandoned the idea of putting strip stamps on top of bottles. Even if the Chancellor's amendments are made, clause 4 would still allow him to put strip stamps on top of bottles and compel the industry to buy the stamps up front. The Government have not given a satisfactory answer on the threat of forgery. The experience of other countries shows that if tax stamps are introduced, high-quality forgeries will quickly appear. An experienced customs officer could doubtless spot the forgeries, but a tax stamp scheme is meant to ensure that retailers and customers can tell at a glance whether duty has been paid on a bottle. Given that high-quality forgeries are likely to appear, they will probably be good enough to fool retailers and customers, so the scheme would fail.
	There is a wide range of estimates on the extent of duty fraud, and that is no basis on which to introduce tax stamps. The Government should establish a methodology to provide an accurate estimate for the levels of fraud. Once they have done so, they should examine the many alternative anti-fraud measures proposed by the industry. I shall vote for amendment No. 35, because the case for tax stamps has not been made. I am pleased that the Government amendments leave the door open so that they can adopt the industry's suggestion of label stamps. I shall not oppose them because they would make the position less bad, but even with those improvements the case for tax stamps has not been made. The Government have not dealt adequately with security costs, the fact that the industry might have to pay for tax stamps up front and the risk of forged stamps, so I appeal to the House to vote to ditch clause 4.

Robert Smith: I welcome the fact that my hon. Friend the Member for Yeovil (Mr. Laws) has tabled amendments Nos. 35 and 41, as they allow us, even at this late stage, to say no to the Government proposal.
	The Government have not made the case for imposing such a burden on the industry, but they have tabled amendments to improve a bad situation. My hon. Friend reminded the Economic Secretary of his wish to address the concerns of smaller producers and small businesses that produce specialist spirits in small production runs. The Government have not yet shown how they plan to address concerns about the burden on that sector, and there is a limited chance that it will be involved in duty fraud or importing and substitution fraud. Those businesses produce spirits that may, or may not, be aimed at the export market, so they will not know at the time of production whether they want to put labels on the bottles. There will therefore be added problems in the production process.
	I hope that in their discussions with the industry the Government will propose ways of tackling the concerns of one or two-person businesses with small production runs of specialist spirits. Fraud is not a major concern for them, and they do not show up in the statistics on the problem. If the House supports the amendments tabled by my hon. Friend it can show that the Government have not yet made the case for their proposals.

David Laws: It was useful to have an update from the Economic Secretary on the discussions he has been holding with the Scotch Whisky Association and the wider industry about the Government's proposals. We welcome the Government amendments moved today, which are certainly an improvement on the proposals that the Government put to us when we debated the issue in April. However, two facts remain that make us inclined still to press our amendment to a Division.
	First, there is still no guarantee that the Government will not go ahead with the same proposals that were put to us before and rejected by all the bodies that considered them, including the all-party Scottish Affairs Committee. There is no guarantee that those measures will not go through. Secondly and most decisively, I come back to the conclusion of the Scottish Affairs Committee, which stated in its report just a couple of months ago that, without accurate figures on the extent of fraud, it could be considered precipitate to the point of reckless to continue. We still have no reliable information on which to base an assessment of the balance of costs and benefits. For that reason we intend to press our amendment No. 35 to a Division.

Question put, That the amendment be made:—
	The House divided: Ayes 147, Noes 252.

Question accordingly negatived.

Schedule 1
	 — 
	New Schedule 2A to the Alcoholic Liquor Duties Act 1979

Amendments made: No. 50, in page 265, line 11, after 'circumstances', insert
	', and with a duty stamp of such a type,'.
	No. 51, in page 265, line 23, leave out lines 23 to 26 and insert—
	'(   )   it carries a duty stamp of a type mentioned in sub-paragraph (5)(a) below which has been affixed to the container in a way that complies with the requirements of regulations under this Schedule, or
	(   )   it carries a label which has been so affixed to the container and the label incorporates a duty stamp of a type mentioned in sub-paragraph (5)(b) below.'.
	No. 52, in page 265, line 27, leave out from 'means' to end of line 34 and insert 'any of the following—
	(a)   a document (a "type A stamp") issued by or on behalf of the Commissioners which—
	(i)   is designed to be affixed to a retail container of alcoholic liquor, and
	(ii)   indicates that the appropriate duty, or an amount representing some or all of the appropriate duty, has been (or is to be) paid;
	(b)   a part of a label for a retail container of alcoholic liquor (a "type B stamp") which—
	(i)   is incorporated in the label under the authority of the Commissioners, and
	(ii)   indicates that the appropriate duty, or an amount representing some or all of the appropriate duty, has been (or is to be) paid.'.
	No. 53, in page 266, line 2, leave out 'document' and insert
	'stamp, or the label incorporating the stamp,'.
	No. 54, in page 266, line 18, leave out lines 18 to 23 and insert—
	'3   (1)   The Commissioners may by regulations make provision as to the terms and conditions on which a person may obtain—
	(a)   a type A stamp,
	(b)   authority to incorporate in a label a type B stamp,
	(c)   authority to obtain a label incorporating a type B stamp,
	(d)   authority to affix such a label to a retail container of alcoholic liquor.
	(1A)   Regulations under sub-paragraph (1) above may in particular make provision for or in connection with—
	(a)   requiring a person in prescribed cases or circumstances to pay, or agree to pay, the prescribed amount to the Commissioners or to a person authorised by the Commissioners for this purpose;
	(b)   requiring a person in prescribed cases or circumstances to provide to the Commissioners such security as they may require in respect of payment of the appropriate duty.'.
	No. 55, in page 266, line 24, leave out '(1)(a)' and insert '(1A)(a)'.
	No. 56, in page 266, line 27, at beginning insert
	'in the case of a type A stamp,'.
	No. 57, in page 266, line 27, at end insert—
	'(   )   Regulations under sub-paragraph (1) above may also in particular make provision for or in connection with requiring or enabling the Commissioners to bear, in prescribed circumstances, in the case of a type B stamp, all or part of so much of the cost of producing the label as is attributable to the incorporation in it of the stamp.'.
	No. 58, in page 266, line 34, after 'stamp' insert
	', or the label incorporating the stamp,'.
	No. 59, in page 266, line 41, leave out line 41 and insert—
	'(   )   the times at which a retail container must bear a duty stamp;
	(   )   the type of duty stamp (see paragraph 1(5)) with which a retail container is to be stamped in any particular case or circumstances;'.
	No. 60, in page 266, line 42, at end insert
	'(including the production of a label incorporating a type B stamp)'.
	No. 61, in page 266, line 44, leave out 'duty' and insert 'type A'.
	No. 62, in page 267, line 1, leave out lines 1 and 2 and insert—
	'(   )   the procedure for obtaining—
	(i)   a type A stamp,
	(ii)   authority to incorporate in a label a type B stamp,
	(iii)   authority to obtain a label incorporating a type B stamp,
	(iv)   authority to affix such a label to a retail container of alcoholic liquor,
	(including provision setting periods of notice);'.
	No. 63, in page 267, line 3, leave out 'duty stamp' and insert
	'type A stamp, or a label incorporating a type B stamp,'.
	No. 64, in page 267, line 4, leave out from 'for,' to end of line 6 and insert
	'in prescribed circumstances and subject to such conditions as may be prescribed, all or part of a payment made under or by virtue of this Schedule to the Commissioners or to a person authorised by the Commissioners;'.
	No. 65, in page 267, line 12, leave out from 'preventing' to end of line 14 and insert
	'a type A stamp, or a label incorporating a type B stamp, from being used by a person other than—
	(a)   in the case of a type A stamp, the person to or for whom the stamp was issued or a person authorised by that person to affix the stamp to a retail container of alcoholic liquor,
	(b)   in the case of a type B stamp, the person to or for whom authority to obtain the label incorporating the stamp, or to affix that label to a retail container of alcoholic liquor, was given by the Commissioners.'.
	No. 66, in page 268, line 34, leave out lines 34 to 38 and insert—
	'   (   )   This paragraph applies where a person—
	(a)   alters a type A stamp, otherwise than in accordance with regulations under this Schedule, after it has been issued, or
	(b)   so alters a type B stamp after the label in which it is incorporated has been produced.
	(   )   His conduct attracts a penalty under section 9 of the Finance Act 1994 (civil penalties).
	(   )   The stamp, or the label in which it is incorporated, is liable to forfeiture.'.
	No. 67, in page 268, line 41, leave out from 'stamped' to end of line 6 on page 269 and insert
	'any of the items mentioned in sub-paragraphs (1A) to (1D) below.
	(1A)   The first is—
	(a)   a type A stamp, or
	(b)   a label incorporating a type B stamp, if the stamp is not a correct stamp for that container in accordance with regulations made under this Schedule.
	(1B)   The second is—
	(a)   a type A stamp that has been altered, otherwise than in accordance with regulations under this Schedule, after it has been issued, or
	(b)   a label incorporating a type B stamp if the stamp has been so altered after the label has been produced.
	(1C)   The third is an item that purports to be, but is not,—
	(a)   a type A stamp, or
	(b)   a label incorporating a type B stamp.
	(1D)   The fourth is any label or other item affixed in such a way as to cover up all or part of—
	(a)   a type A stamp affixed to the container, or
	(b)   a type B stamp incorporated in a label affixed to the container, except where the label or other item is so affixed in accordance with regulations under this Schedule.'.
	No. 68, in page 269, line 16, at end insert
	'(including, in the case of a container, its contents)'.
	No. 69, in page 269, line 21, leave out lines 21 to 26 and insert—
	'   (   )   The following items are liable to forfeiture.
	(   )   The first is an item that purports to be, but is not,—
	(a)   a type A stamp, or
	(b)   a label incorporating a type B stamp.
	(   )   The second is—
	(a)   a type A stamp that has been altered, otherwise than in accordance with regulations under this Schedule, after it has been issued, or
	(b)   a label incorporating a type B stamp if the stamp has been so altered after the label has been produced.
	(   )   The third is—
	(a)   a type A stamp, or
	(b)   a label incorporating a type B stamp,
	that is in a person's possession unlawfully.'.
	No. 70, in page 269, line 36, at end insert—
	' "type A stamp" has the meaning given by paragraph 1(5)(a) above;
	"type B stamp" has the meaning given by paragraph 1(5)(b) above.'.—[Dawn Primarolo.]
	Motion made, and Question proposed, That further consideration be now adjourned.—[Mr. Ainger.]

Alex Salmond: I should like to speak against that motion, if I may. It is 7.28 pm and we are debating the Finance Bill, which is a very important measure—arguably the most important of the parliamentary calendar. Several key issues were due to be debated today. The next groups of amendments deal with fuel duty, income tax, corporation tax, taxation in relation to historic houses, which I did not intend to speak on myself, although I am sure that it is a vital matter, pension scheme benefits and contributions and, finally, relief for petroleum exploration activities, on which I had prepared a few short remarks. I hope to have the opportunity to share that information with the House later this evening. My point is simple, and I was not intending to—[Interruption.]

Mr. Deputy Speaker: Order. Hon. Members must come to order and listen to the hon. Gentleman who is addressing the House.

Alex Salmond: I was not intending to give the House the full extent of the remarks that I was going to make later this evening, but I am quite happy to do so if Members are enthusiastic enough to listen to them.
	My point is a serious one. I do not think it right, when these matters in the Finance Bill have been set down for debate today, that the Government should announce their desire to pull stumps at 7.30 in the evening. I have no doubt that that has been done in co-operation with the official Opposition. As we know, however, on so many issues ranging from Iraq across the social and economic agenda, the official Opposition offer no opposition whatever. Everyone is aware of that, but some of us would like to go on debating the matters before us. I should like to hear from the Government, and from Treasury Ministers in particular, that provision will be made for us to discuss all these vital matters tomorrow or another day, and that the House will not be deprived of the opportunity to hear my remarks on petroleum exploration—[Interruption.] The Tories may giggle at that, but with so many jobs in Scotland—

Dawn Primarolo: Will the hon. Gentleman give way?

Alex Salmond: Of course I will.

Dawn Primarolo: I am sure that if the hon. Gentleman had had time in his busy day to look at the Order Paper, he would have seen that we have six and a half hours tomorrow to discuss the remaining business. That will be ample time and he will be able to make his contribution then.

Alex Salmond: I always feel a great friendship towards the right hon. Lady because, a few years ago in a Budget debate, she was one of the few Members who supported an intervention about the poll tax and a few other things in the middle of Lord Lawson's Budget. She had the strength and integrity at that time—and I dare say that she has carried them through into her Government position—to see a point of justice when it was made. She says that we have six hours tomorrow, but I note that we have already spent a considerable amount of time on our debate today, and we have reached only the seventh or eighth group of amendments.
	I have not detained the House up until now. My colleagues have not detained the House either; they have restricted their remarks to the vital Scottish interest of tax labelling on whisky. I want some indication that, if we continue to make progress at this rate, time will be allowed for us to get to the vital matters that I and others want to debate. We had the choice to stay here beyond 7.30 this evening and to take the appropriate time for our debate, and I think that hon. Members should be prepared to stay later. That is what our constituents would expect of us. The Minister's saying that there are six hours tomorrow does not guarantee that proper time will be available to debate these vital issues. I would be happy to give way to her again, if she can give me an assurance on that. I really would like a wee bit more than to be told that there are six hours tomorrow, when we have already spent that amount of time on our debate today and made very little progress.

Dawn Primarolo: I am trying to assist the hon. Gentleman. The estimate was that the remaining business would take approximately six and a half hours tomorrow. I can assure him that there will be enough time tomorrow to complete the outstanding business on the Finance Bill. He will have every opportunity to contribute to each of the debates tomorrow. There is plenty of time. I am giving him the assurance that he seeks.

Alex Salmond: I shall ignore the "Watch with Mother" voice in which that was presented to me, and take the assurance from the Minister, along with the nods from the Whips further along the Treasury Bench, which are even more reassuring. I shall hold the Government to that guarantee, and I look forward to seeing the Ministers in the debate tomorrow.
	Question put and agreed to.
	Bill to be further considered tomorrow.

DELEGATED LEGISLATION

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

Supreme Court of England and Wales

That the draft Courts Act 2003 (Consequential Amendments) Order 2004, which was laid before this House on 10th June, be approved.—[Mr. Ainger.]
	Question agreed to.
	Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

Countryside

That the draft Chilterns Area of Outstanding Natural Beauty (Establishment of Conservation Board) Order 2004, which was laid before this House on 16th June, be approved.
	That the draft Cotswolds Area of Outstanding Natural Beauty (Establishment of Conservation Board) Order 2004, which was laid before this House on 16th June, be approved.—[Mr. Ainger.]
	Question agreed to.

NATIONAL NEIGHBOURHOOD WATCH ASSOCIATION

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ainger.]

Matthew Taylor: I am grateful for the opportunity to raise an extremely important issue, which has been raised in the other place and by other Members of Parliament, not least by a number of Labour Back Benchers, who have been expressing concern with an early-day motion and representations to Ministers. No doubt they, like me, have been contacted by local neighbourhood watch members and co-ordinators who are aware of the concerns that have been raised at national level.
	First, it is worth saying that there is pretty much universal support in the House for local neighbourhood watch schemes. They have been extremely effective, they are essentially voluntary, they exist in many parts of the community, across the country, and their success is perhaps best illustrated by the fact that many insurance companies will offer discounts on insurance for people who live in areas where neighbourhood watch schemes are active. Whereas many of the Government initiatives for which we argue in terms of tackling crime cost money—whether that is more police on the beat, or some other campaign—neighbourhood watch comes at very little cost to Government or local police authorities, it is done by volunteers and it works. There is not much else that can be described in those terms. It is invaluable.
	The national body is a registered charity and was formed in 1995 by volunteers, for a number of reasons. Partly, it was in response to quite a controversial speech by the then Home Secretary, the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) and leader of the Conservative party, who proposed changes to neighbourhood watch, which implied getting out and being active on the streets. The volunteers were concerned that that implied a kind of vigilantism, which they did not want. One of the reasons for the formation of the organisation was therefore to give a voice to concerns at national level and to make representations to Government on an independent basis. It does more than simply provide a voice for the local organisations and volunteers; it also provides support, training, legal advice and conferences.
	The reason that I have sought this Adjournment debate is that there now seems to be a serious question mark as to whether that national association will be able to continue in existence at all. It has been reliant for some years on a national sponsorship deal, which it sought to renew with a new organisation, and thought that it had succeeded in doing so, but at the last moment it was effectively blocked by a Home Office decision. It sought Government support as an alternative on a temporary basis, but that has been blocked because the Government claim that an audit cast doubt on the organisation's financial viability—the organisation has no argument on the financial issue, which is why it supports the Government sponsorship, so there is a degree of tautology in the Home Office's argument. In addition, the audit highlights a shortage of money, not poor bookkeeping, which is the impression that has been given.

James Purnell: I support completely what the hon. Gentleman said about the great work of the neighbourhood watch in all our areas, including in my area of Stalybridge and Hyde. I am slightly unsure about whether he is saying that there should be ongoing financial support from the Government. My understanding of the position of the association is that it wanted to have private money as its long-term base of funding, so that it can remain independent.

Matthew Taylor: The organisation wants to maintain its independence, for the reasons that I mentioned at the outset. That is partly why it was formed in the first place. The point is that because the sponsorship deal is caught up in a wrangle with the Home Office, temporary funding is needed to see the organisation through. That is why the argument that it is not financially viable is a bit of a tautology. The Home Office accepts that it would be viable if the sponsorship were there; the Home Office has caused problems with the finalising of the sponsorship deal; the organisation has therefore asked for temporary funding; the Home Office appears to be saying that it will not provide the funding on the ground that the organisation has not enough money to run itself. That is clearly a circular argument.
	I want to start with the issue of the private funding, because it needs to be explained. The original sponsorship arrangement was with Norwich Union. It was in place from 1994 until 2003. I do not think there is any dispute about the fact that it worked well. There were no Home Office objections, and it involved the exclusive commercial use of the neighbourhood watch logo. That was, of course, key to the process in which Norwich Union was involved: it wanted to be seen to back an organisation, have the use of the logo and support the local neighbourhood watch. No doubt it considered that commercially advantageous as well. The arrangement was ended by Norwich Union when its ownership changed and it had new priorities, not because of any dispute with the association or any disagreement about the important role of neighbourhood watch.
	Over the past 18 months, the association has been working to secure new sponsorship. A major high street bank has agreed to sponsorship, essentially on the same terms as Norwich Union. As a result, by 2008 £1 million per annum would be flowing to local neighbourhood watch groups. The agreement was due to be signed on 19 March, but the Home Office and Treasury solicitors wrote to the association's trustees on 17 March—just two days beforehand—threatening possible legal action over the logo.
	That brings me to the issue of the logo. As far as I can see, there is no history of any original dispute with the association. After all, the logo has been used in this way for many years, with, it appears, complete Home Office agreement. In 2002, however, another insurer, Direct Line, began using it without permission.
	Following a challenge, the association and the Home Office were asked by Direct Line's insurers to provide evidence of copyright. They failed to do so. There were no documents and no artwork to be provided by the Home Office to show that it had the copyright. The Treasury solicitors were apparently saying that most records since 1985 had been destroyed. In the meantime, it emerged not only that Direct Line was going down this route, but that the home watch logo—which is used instead of the neighbourhood watch logo in some areas—had been registered by two companies, with no authorisation or agreement whatever.
	The advice to the National Neighbourhood Watch Association from its lawyers was that it had no option but to protect the neighbourhood watch trade mark itself, as the Home Office could not establish Crown copyright. Private commercial companies were rapidly starting to use it, and it was clearly at risk of being lost altogether and abused by other private organisations. For the Home Office to suggest that the association had some ulterior motive in deciding to register copyright at this point is ludicrous. Why would it want to abuse its own logo, given that it consists effectively of local organisations that have come together at national level? Nor was it seeking to do anything that it had not done before with Home Office agreement. The Norwich Union agreement had been in place for many years; the association simply sought to replicate it.
	The Minister wrote to me saying,
	"by this action, the National Neighbourhood Watch Association sought to change the entire basis on which Neighbourhood Watch has always operated".
	I cannot see how that can be true, given that for so many years it operated on exactly that basis. The registration process was carried out through all the usual channels, with advertisements in the appropriate journals, and the association's lawyers took it through the process. Nor was the process clandestine. The issue of copyright was discussed with Home Office officials following proceedings against Direct Line. In January 2003, the Home Office suggested that ownership be transferred to the National Neighbourhood Watch Association—and that is in writing.
	The Home Office knew about that process for months, so why wait until just two days before the signing of a commercial sponsorship arrangement? There were never any objections about Norwich Union's usage. Exclusivity is clearly essential if the national association is to secure commercial sponsorship. It sought Crown copyright action to stop Direct Line abusing the logo and other organisations registering it. It would have been happy if the Home Office could have stopped other organisations abusing it. That is what it wanted, but that did not happen.
	The central point is to ask whether the Minister—I appreciate that these are difficult issues—will agree to step back and reconsider the issue. As I understand it, there is no issue for the National Neighbourhood Watch Association about who has the copyright. The issue is that, whether the copyright is in the hands of the national association or the Government, the aim is to stop private companies abusing it, as Direct Line sought to do and as others have done in registering the home watch title.
	That brings us to the issue of public funding. Following the breakdown of the commercial sponsorship proposal at the last minute, the Government allocated grants through to the end of 2003 and early 2004 to help to resolve the inevitable financial shortfall, but further support is being withheld due to what the Government describe as an audit report. The Minister wrote to me, saying that
	"government accounting rules preclude giving public funds to organisations which are financially unsound."
	The way in which the matter has been reported would give the impression that there was something wrong with the financial management of the national association. The Mail on Sunday, for example, quotes a Home Office source as saying:
	"NNWA's books are not in good shape".
	The Home Office view is that they are "financially unsound" but it was not an official audit. It was a funding review, which concluded that, without the commercial sponsorship, the national association is short of funds. However, that is why it is applying to the Government for funding. It would not be asking them for that if it were not short of funds. I cannot see what the dispute is.
	Until I hear from the Minister, all I can take is the national association's view. It says that at no point did the auditors find fault with its accounting controls or processes. Indeed, it has a good financial performance record. It has been audited by KPMG year after year in accordance with charity law. Not only has KPMG approved the books but it has not issued a management letter for the past three years, which is more than can be said of many companies, so the financial management is, in any normal sense, clearly sound. Indeed, if there is an issue about people getting the figures wrong, it is to do with the Government's own financial review, since its authors did not consult the national association management during the review, or share their findings prior to publication so that matters could be clarified or resolved if there were concerns.
	The proof of the pudding—no audit company would allow that to happen because it would check with the organisation—is that on 17 May a Home Office official wrote to the national association admitting that
	"owing to a misunderstanding I am not confident that the profit and loss account at Appendix 4 of the report is entirely accurate".
	Therefore, if there is any mismanagement here, it seems to be with the Government, not the national association.
	Clearly, the authors of the audit recognise that the association would be self-supporting if a contract with a commercial sponsor were secured, which brings us back to the question of why that is effectively being blocked.
	We know from debates in the House of Lords that the Government have now said that they would step in if the NNWA folds. The Lords Home Office Minister said that
	"if the national organisation . . . has to fold, of course, we will put measures in place to ensure that there is a national support network."—[Official Report, House of Lords, 27 May 2004; Vol. 661, c. 1434.]
	But the whole point of the network is not just that it runs conferences and provides training and support, but that it is an independent voice for the local volunteers. Frankly, in effect the NNWA appears to be being nationalised through the back door and taken over by the Government. That is highly inappropriate for an organisation that is entirely dependent on volunteers.
	Last weekend, The Observer reported the Minister for Crime Reduction, Policing and Community Safety as saying that the Government want to "beef up" neighbourhood watch schemes to become "Neighbourhood Action schemes". What does the Minister mean by "Neighbourhood Action schemes"? That sounds rather like the proposals introduced by a former Conservative Home Secretary, who talked in 1995 about "Getting them out on the streets, rather than just looking through their windows". In fact, that was the very issue that led to the formation of the NNWA, which argued that it did not think that an appropriate use of the volunteer network.
	The Minister will agree with me about the importance of Neighbourhood Watch at a local level. I hope that she agrees that the ideal solution is to maintain a national umbrella organisation that reflects and responds to local community groups, and which is able to continue to provide support and training, and an independent voice and conferencing, for such people. That is important not least because it is much the most likely way of continuing to get people to take part in the NNWA.
	In the light of that, and given that Ministers have never had a problem with exclusive use of the logo being the basis of the organisation's funding and sponsorship, it is a little hard to understand why it should be such a great problem now. If they do not want the NNWA to hold the copyright, it should be simple to resolve the problem through Crown copyright processes. In the light of my discussions with the NNWA, I do not believe that it has any problem with that idea. However, the NNWA and local neighbourhood watch associations—and, indeed, the Government—cannot live with people such as Direct Line simply using the logo ad hoc, with Government solicitors apparently unable to prove that there was Crown copyright. In the light of that understanding, I hope that the Minister will reconsider and see whether there is a way to resolve these issues.
	A number of criticisms have been made of the NNWA that are misplaced, and I shall give one more example of why I am concerned about the funding review—the so-called audit. The review argues that the NNWA secured premises in Buckingham gate that were more expensive than elsewhere, but we should remember that that was part of the Norwich Union sponsorship deal, which was self-funding. In fact, that brought in a profit of £50,000 per annum, rather than resulting in a net cost; indeed, that is admitted elsewhere in the funding review document.
	Secondly, the review looked at eight comparators, including moving elsewhere—it was to either Stockport or Stockton, I cannot remember which—where rents were as low as £16.50 per sq ft. But because of existing staff costs and the sponsorship deal, that would have proved more expensive than the offices that the NNWA had secured. The costs were the lowest of the eight comparators examined—a fact that would have been known, had the authors of the funding review taken the trouble to discuss matters with the NNWA before publication.
	I know that the Minister did not herself conduct the review and that she is reliant on information from her officials, but there are real issues that need to be resolved. The NNWA has been pressing for a meeting for some time, and she has now agreed to meet its representatives. I hope that, in the light of what I have said, she will meet them with a very open mind, and that we can solve these problems in a manner that deals with the concerns of various Members, including her own Back Benchers.

Hazel Blears: This debate is very important. Probably every single Member will know of neighbourhood watch and many will be members of home watch schemes in their constituencies. It is an amazing organisation—there are 155,000 local schemes covering 6 million people in this country—and the largest volunteer organisation that we have. I want to put on record at the outset the Home Office's huge regard for the work that neighbourhood watch does, not just in monitoring crime but in playing an increasingly active part in making communities safer. Much of that work is done selflessly by volunteers up and down the country.
	The Home Secretary has made it clear in his Edith Kahn and Scarman lectures that we regard neighbourhood watch as a key component of the civil renewal programme on which we are seeking to embark, which aims to build capacity in local communities to be able to tackle some of the issues. The work of neighbourhood watch is beyond question.
	The question today is about the status of the National Neighbourhood Watch Association, its relationship with the Home Office, its funding, its use of the logos and its relationship with local and regional parts of the neighbourhood watch movement. I want to address each of those matters in turn.
	It is important to bear in mind that the NNWA was set up only nine years ago and did not exist when neighbourhood watch came into being some 20 years ago. It is a relatively new organisation that had the general aim of furthering the objectives of neighbourhood watch, but was not set up either to take over the running of neighbourhood watch, nor to control, supervise or in any way regulate the way in which local neighbourhood watch schemes operated at local level. It was not the sort of national organisation to which local organisations would be subservient, setting rules, regulations and supervising operations. It is a different organisation.

Paul Tyler: I have listened with care to what the Minister has said about the network, and we all endorse what she says about the importance of those involved feeling that they are volunteers. Does she accept that the national association was set up democratically by the network and was not imposed from above? Does she also accept that there is an important point here regarding perception? The perception of the volunteers is that there is a control-freak tendency in the Home Office that wants to take over the network. If that were to happen, the volunteers would simply leave in their droves.

Hazel Blears: There are two issues, here. The first is whether the national association was set up democratically. There are lots of interpretations of the word "democratic". It is my understanding that local associations are not required to affiliate to the national association. They do not elect people in the normal way; we do not see every single member of the home watch organisations having one vote in electing the trustees. We are not talking about that kind of subscription organisation in those terms. Some local organisations are affiliated; some are not. We have had letters and e-mails from local volunteers who have never heard of the national association, so I do not entirely accept the hon. Gentleman's contention that this is a vibrant, democratic organisation, owned by its members.
	I want to put a stop here and now to the second issue that the hon. Gentleman raised. There is absolutely no intention within the Home Office to take over neighbourhood watch. It is a vibrant volunteer organisation, and we want to support, facilitate, enable and empower it to develop in the way that many local organisations want.
	I recently met some active co-ordinators from neighbourhood watch who said that they thought the organisation was in need of some updating and development. It is not active in many of the inner-city, high-crime areas in the country and many neighbourhood watch volunteers would acknowledge that the coverage needs to be developed into areas that could benefit from such volunteer activity. Perhaps there are not enough young people involved in some of our neighbourhood watch activities. If we want to ensure that neighbourhood watch addresses something like antisocial behaviour—a big concern now—as well as crime, we need to see how we can develop the organisation. But there is absolutely no intention for us to dominate it from the centre; we want to facilitate it locally.

James Purnell: I think that many will welcome the Minister's point that the Home Office has no interest in controlling the organisation. I was delighted to hear that my hon. Friend will shortly have a meeting, but in advance of it, can she tell us how big a stumbling block the copyright of the logo is? I encourage her to use her good offices, as she has already, to find a way through that particular problem.

Hazel Blears: I want to deal with the issue of the copyright logo and to refute the suggestion that the Home Office's last-minute intervention into copyright matters was designed to frustrate the success of the sponsorship deal. That was absolutely not the case. Indeed, my understanding is that the Home Office intervened as soon as it became aware of attempts by the national association to seek copyright of the logos. Had it been brought to our attention earlier, we would have been in a position to intervene earlier.
	The logo is an important matter. The Central Office of Information designed it in 1994 on behalf of the Home Office. It is therefore Crown copyright. We received complaints from local neighbourhood watches and from one police force that the National Neighbourhood Watch Association had, in early 2003, registered the logo as its own trade mark. That was done without consulting the Home Office, the police or neighbourhood watch more generally. That is why we are attempting to take steps to resolve that situation with the national association to restore ownership and control of the neighbourhood watch trade marks to the Home Office, because we want to ensure that local and regional associations can continue to use it. If exclusive use of the trade mark is given to any sort of commercial organisation, the local associations could be debarred from using it themselves, which would be an absolute tragedy, because the local associations need access to the well recognised trade mark.

Matthew Taylor: I appreciate that the Minister is reliant on her brief, but I have to ask her why, if there is a clear Crown copyright, it was not possible to establish it in the court case with Direct Line, which took to using it on the grounds that it was not copyrighted? Also, why did the Home Office make a written suggestion in January 2003 to transfer the ownership to the NNWA as a means of resolving the problem?

Hazel Blears: I have not had sight of the letter to which the hon. Gentleman refers, but I will happily consider it and respond to it in due course. Neither am I aware of the particular negotiations in the court case, but I will happily respond when I can. I can tell the hon. Gentleman that the original deal with Norwich Union was not an exclusive deal. It retained the right for local and regional associations to use the copyright. What we are talking about here is the possibility of an exclusive deal, which would be damaging to the interests of the local organisations, and it is not where we want to go.
	On the funding position, the Home Office audit was mentioned. I have to say to the hon. Gentleman that the audit did express concern about the high central costs of the accommodation and the high salary costs that the national organisation continued to fund. The concern about the accounts was that the revenue forecasts for 2003–04 and 2004–05 were based on unfounded assumptions about continued Home Office funding of £618,000. If a revenue forecast contains assumptions about funding that have not been agreed, any organisation would clearly be concerned about the financial basis of future viability.
	Despite the assertion of the NNWA that it wanted to remain independent and have private sponsorship, the Home Secretary agreed to £350,000 of central Home Office support in order to tide the national organisation over its difficult period when the Norwich Union sponsorship was withdrawn. There was a commitment from the centre, despite the protestations about the organisation's independence. I entirely respect that, but the Home Secretary decided that the Government could not keep providing more public funding when the audit showed that the organisation was unwilling to take control of its high central management costs in respect of salaries and accommodation and that it was building into its budget a reliance on continued Home Office funding rather than on the private sector funding that it was seeking to obtain.
	I understand that the current proposals for an agreement with Lloyd TSB involve a third party with a joint venture company called Hot Listed Ltd. I am not sure why the organisation is involved with that joint venture because it appears that the company is not making any financial investment towards the sponsorship deal with Lloyds TSB. That matter would also have to be considered in establishing whether it was an appropriate way forward for the association.
	As the hon. Member for Truro and St. Austell said, I confirmed in an oral reply that I would be happy to meet the—
	The motion having been made after Seven o'clock, and the debate having continued for half an hour, Madam Deputy Speaker adjourned the House without Question put, pursuant to the Standing Order.
	Adjourned at five minutes past Eight o'clock.